On March 8, President Trump imposed a 25 percent tariff on steel imports. The European Union, Mexico and Canada were initially exempt, but an announcement on June 1 added these trading partners to the list. Thanks to the tariffs, the price of steel in the United States has soared 30 percent this year. Major steel producers like U.S. Steel are set to announce profits of $2 billion in 2018, after losing $1.7 billion over the last three years. With the corporate tax rate recently slashed from 35 to 21 percent, steel companies will hold onto even more of these record profits.
However, while the steel industry thrives, steelworkers throughout the country just overwhelmingly voted to authorize a nationwide strike that could paralyze the sector. Last week, 15,000 workers at plants operated by U.S. Steel unanimously supported the potential strike. This week, roughly 16,000 more from ArcelorMittal plants joined in.
Why are steelworkers, after decades of lobbying for high tariffs, so unhappy now that Trump has answered their demands?
The answer is that profits from high steel tariffs aren’t being shared with steelworkers. The strike threat is the union’s effort to capture a share of those profits for workers.
Workers want a share of the profits
The contract between U.S. Steel and the United Steelworkers (USW) expired on Sept. 1, and the company and union are now locked in negotiations. The latest proposal from U.S. Steel to the United Steelworkers offers a small increase in wages, which would be wiped out by deep cuts to workers’ health care benefits. According to USW President Leo Gerard, “it is time for the workers to share in the success U.S. Steel is seeing.”
Many steelworkers voted for Trump in 2016, attracted by his promise of high tariffs. Those same workers now see that tariffs can increase company profits without increasing wages. The revelation threatens to trigger a nationwide strike, which might in turn weaken working class support for Trump in the crucial months before the 2018 midterm elections.
High tariffs don’t mean high wages
As my research shows, there is no automatic connection between high tariffs and high wages. In this case, Trump’s steel tariffs increased steel prices and the industry’s profits, but those profits will only be shared with workers if the United Steelworkers are powerful enough to bargain for higher wages.
The strike threat may get U.S. Steel to improve its latest offer. If so, it would be a relatively unusual victory. The power of American labor unions has precipitously declined over the last 30 years, and private sector unions seldom strike. With more than 40 million Americans working for less than $12 an hour, companies can draw on an immense surplus of low paid labor that weakens unions and contributes to stagnating wages for workers.
High tariffs have the potential to increase workers’ wages, but only if they are combined with public policies that build strong labor unions. The Trump administration has done the exact opposite, leaving workers with few prospects for profit-sharing. Most importantly, Trump supported the Supreme Court’s Janus decision, which reduces unions’ funds and limits their ability to organize new members and mobilize voters.
History may be repeating
American history shows that if a strike comes, it will impact how workers view high tariffs and how they vote in the upcoming midterm elections.
The crucial historical precedent is the infamous Homestead steel strike, which culminated in the election of Grover Cleveland, a Democrat, in 1892. The Republican Party of the late 19th century promised that high tariffs would deliver higher wages for American workers. When a Republican Congress passed the protectionist McKinley tariff of 1890, steel prices and profits started to soar.
Just months before the 1892 general election, the Amalgamated Association of Iron and Steel Workers (the precursor of today’s United Steelworkers) was locked in contract negotiations with the Carnegie Steel Company (the precursor of today’s U.S. Steel).
The union argued that, “with the metal tariff as it is … there is no reason why the labor of the mills should not have part of the plum of profits that the ownership has been enjoying.” In response, the company locked out the workers and proclaimed that “hereafter, the Homestead steel works will be operated as a non-union mill.”
The ensuing conflict ultimately ended with four striking workers killed, the town of Homestead occupied by the Pennsylvania National Guard and the union decimated.
Although the steelworkers lost the strike, the conflict became a major focal point in the 1892 presidential election. Workers throughout the country began to question whether the GOP’s high tariffs actually delivered benefits to American workers.
While the steelworkers had loyally voted for Republicans for decades, their changed views on tariffs led many of them to throw their support to the Democratic Party. The industrial states of Wisconsin, Indiana, Illinois, and New York all voted for Grover Cleveland, the victorious Democratic candidate for President.
What does this mean for the midterm elections?
With the midterm elections just seven weeks away, what is at stake is not just union wages but labor votes.
In 2016, Trump attracted working class support with the promise of trade protection. In 2018, a steel strike would demonstrate that high tariffs do not automatically increase workers’ wages.
Will workers disappointed with Republican tariffs vote for Democrats? If they do, it would be the second time that a steel strike changed the way that workers thought about trade policy and altered an American election.
Adam Dean is an assistant professor in the political science department at George Washington University. His book on labor unions and international trade, “From Conflict to Coalition: Profit-Sharing Institutions and the Political Economy of Trade,” was published by Cambridge University Press in 2016.