PAUL VERYSER'S STEEL-PARTS company, Stampings Inc., is in big trouble. Tariffs on steel imports, imposed by President George W. Bush in March, have pushed the cost of steel up by more than half on the American spot market, and this has added a whopping 25 percent to the cost of the air-bag, seat-belt and steering-wheel assembly parts his company makes.
The higher costs wouldn't be so bad if the Fraser, Mich.-based company could pass them on to its customers, mainly the big automakers and their top suppliers. But most of these companies refuse to pay, Veryser says. Whenever he dares ask, he's told there are plenty of alternative suppliers overseas, in places such as China and Mexico and Thailand. Labor is a lot cheaper in those countries, and now the steel is, too. "I'm the one who has to eat the extra cost," says Veryser. "And I just can't do it anymore." In September he shut Stamping Inc.'s plant in Harlingen, Texas, and laid off the 15 workers there. Without relief soon, he says, he'll also have to shut the Fraser plant, which his father opened in 1960; that would eliminate another 35 jobs.
Veryser has been a Republican all his voting life, and he says one of the worst things about the tariffs is the sense of betrayal. "Why would a president whom we all supported do something so hurtful to us? ... There has to be another way."
Indeed, there are many ways besides tariffs by which the U.S. government could help U.S. steel companies and steelworkers survive--the avowed purpose of the tariffs--in a world glutted with lower-cost, foreign-made steel, just as there are many different ways to design a tariff regime. The Bush administration chose the particular approach it did because, first, it doesn't cost taxpayers anything up front and therefore seemed cheap, and second, the approach seemed to promise a big near-term political boost in steel-manufacturing states.
Unfortunately, the administration's plan didn't account for the radical new realities of manufacturing in a global age. The tariffs are indeed diverting dollars to America's most hard-pressed steel manufacturers. But unlike what would have occurred in an earlier era, the burden is falling mainly on the thousands of small, often family-owned manufacturing companies in America that use steel in their products. And the owners of these small companies, clustered heavily in the Midwest but found everywhere from New England to California, have long been among the strongest supporters of the Republican Party.
FROM THE FIRST, THE ADMINIStration's decision to impose steel tariffs was viewed by both labor and industry as mainly political. How else to explain why a professed free trader such as Bush would erect America's most aggressive industrial protection policy in decades, an action that severely strained relations with key allies in Europe and Asia in the midst of the war on terrorism?
By late summer, all the pieces seemed to be falling into place, and Karl Rove and his team were further buffing their reputation for political cunning. The White House's main target--the tens of thousands of steelworkers in Pennsylvania, Ohio and West Virginia and the hundreds of thousands of steelworker retirees there and in Florida--were still openly thankful for this unexpected aid. Meanwhile, a number of press reports credited the tariffs with helping the administration win the contentious "fast-track" trade vote in the House in late July. The tariffs, so the argument went, provided just enough cover for steel-state Republicans to vote to grant the president special powers to conclude trade deals. Finally, the administration seemed at last to be repairing relations with France, Japan and Russia, buying peace with a series of carefully crafted "exclusions" from the tariffs.
But a closer look throws every one of these political achievements into doubt.
First, the closest midwestern House races turned on other issues. …