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Trade means exchanging something you have for something you want more. This is true when you exchange a Ken Griffey Jr. baseball card for Kent Hrbek (an emotionally motivated trade I once made). It's also true when you pay anywhere from $600 to $1,200 for a ton of hot rolled coil steel to make car frames or I-beams.

Whether or not trade is fair often falls to interpretation. Griffey's card might be worth more on the open market, but we must also consider the economic theory of "Go Twins!" If that sounds overly sentimental, know that emotion sometimes affects U.S. trade policy, too.

On Monday, President Donald Trump announced 25% tariffs on all foreign imported steel and aluminum. The U.S. buys steel and aluminum from many countries, but products from China, Vietnam, South Korea, Japan, Canada and Mexico will be among those most impacted.

In the short run, heavy tariffs on foreign steel and aluminum will be a boon to American companies and, indirectly, their workers. In the longer term, price increases could sap demand and gamble with the economy. A trade war could have myriad unintended consequences.

The U.S. imports between 20-25% of all the steel it uses. In 2023, the country consumed about 93 million tons of steel, according to the U.S. Geological Survey, a number that analysts expected to drop slightly at the end of 2024. For its part, Minnesota's Iron Range region produces most of our nation's domestic iron ore, about 40 million tons annually.

You'll note that those numbers don't match. That's because even most American steel doesn't use raw taconite ore like what's produced in Minnesota. Newer furnaces use more scrap iron than ore.

Even though most steel remains domestically produced, cheaper foreign steel challenges U.S. producers who have higher labor costs. Their delicate cost equation determines whether they keep mills running, shut them down or build new ones. It also impacts profit, which is the biggest motivator for investors.

For example, during the recession of 2008-09, and again in 2015, steel imports during economic downturns contributed to the decision by U.S. Steel and Cleveland-Cliffs to idle northern Minnesota mines. This caused temporary layoffs of hundreds or even thousands of workers at various times. However, a sustained period of high steel prices and lower imports over the past four years inspired investment in modern technology at Keewatin Taconite in 2024.

In all cases, foreign competition or corresponding tariffs were major factors.

Tariffs work best when they target specific unfair trade practices. For instance, steel "dumping" occurs when a foreign country subsidizes its export of steel to the U.S. at less than it costs to produce and ship. This commonly happens during periods of economic slowdown, especially in state-run economies like China's.

It is worth more to some countries to keep their steel industries going than to make profits on the steel. That simply does not compute in the American economy. Here, companies shut down mines in northern Minnesota or steel mills elsewhere as soon as demand slows. Stockholders prefer selling less steel at higher prices than overproducing to keep people working. Even a slight increase in dumped steel can create havoc in the market, invariably leading to layoffs.

But tariffs mean higher prices, which creates another kind of problem. Not for the companies and stockholders, mind you, but for manufacturers and consumers.

Last month, I spoke with Jason Wobbema, CEO of Advanced Machine Guarding Solutions in Hibbing, Minn. His company makes specialized safety guards that protect people working alongside factory equipment and robots. His products are composed of union-labor American steel made with ore from the Mesabi Iron Range.

But this choice comes at a price. He pays more, and the higher the steel prices, the higher his prices. His whole business model — selling components to support automation — is only possible because automation is replacing human workers because of cost.

Wobbema isn't alone. On Tuesday, the Minnesota Star Tribune reported that Hibbing Fabricators was also expecting to take a hit from tariffs — not because they import steel, but because their customers export from Mexico.

When domestic iron and steel becomes too expensive, it slows demand and pushes manufacturers to alternative materials. If you wonder why new cars and trucks feel more "plastic" than older models, it's because they use composite components in the interior and shell of the vehicle. That's partly to cut weight for fuel efficiency, but it's also cheaper than all-steel construction. Steel use has been on the decline the past two years.

Despite these changes, steel remains an essential element for construction and manufacturing. So, whatever it costs, steel buyers must pay. Steel prices dipped last year, but Trump's tariff proposals have already spurred American steelmakers to increase prices.

They're looking for a magical place deep in the ledger where prices are as high as possible without sending the economy into a tailspin. Tariffs allow them to reach a little farther over that line.

The idea of a universal tariff on all foreign steel hurts countries who play by the rules the most. Canada, in particular, will suffer from the Trump proposal. America's largest integrated steelmaker, Cliffs, just bought the Canadian steelmaker Stelco as part of an interconnected North American supply chain. Even with tariffs, China can still churn out cheap steel. That's not true of our neighbor to the north.

And tariffs on foreign steel do not always include iron ore. Brazil is one of the largest iron ore producing countries in the world and is close enough to ship to southern steel mills.

Tariffs provide an emotional jolt that doesn't necessarily correlate to their economic impact. Iron miners and steel magnates alike are thrilled, because they can both point to material benefits in the near future.

But if American steel companies fail to invest their tariff-fueled earnings into electric-arc furnaces and other modern upgrades, the patriotic euphoria could be short-lived. When Trump's first administration implemented similar tariffs, companies kept the money. If they do that again, cash-strapped consumers will be left to wonder how fair this trade really was.