[By Guancha Observer column author Jiang Yuzhou]
On April 2nd, U.S. President Trump officially launched a global "tariff war." He signed two executive orders at the White House regarding the so-called "reciprocal tariff," announcing that the U.S. would impose a "minimum benchmark tariff" of 10% on all trading partners, and impose higher tariffs on certain trading partners.
However, the White House also stated that steel and aluminum imports would not be affected by the new tariffs, providing some buffer for domestic buyers in the United States.
This "exceptional arrangement" is behind the reality problem that the Trump administration and relevant industries in the U.S. have to face.
Since March 12th, the U.S. has imposed a 25% tariff on all imported steel and aluminum, according to Trump and his team, to "restore fairness in U.S. trade relations" and "combat non-reciprocal trade," protecting the U.S. steel industry from "unfair trade practices worldwide." However, due to the broad scope of this regulation, which includes even small components like screws and nails, chaos has already erupted in the U.S. industry after its implementation, revealing its vulnerabilities.
Taking steel alone, over the past 150 years, the U.S. steel industry has experienced a complete cycle of prosperity and decline, having once dominated the world with a peak production of two-thirds of global output; yet it has also seen a scattered decline as renowned brands and production lines faded away. This mirrors the state of the U.S. economy, silently pleading in the dust of its iron and steel bones, where complacent protectionism will ultimately lead.
Data source: Minmetals Research Institute
One, The Splendor and Decline of American Steel
Compared to the history of the United States, the steel industry has been around longer. As early as more than a century before the founding of the United States, Jamestown had already begun smelting iron, while the Mayflower had just arrived on the New World.
However, the true flourishing of American steel began in the mid-19th century. In 1873, the U.S. produced 220,000 tons of steel, which expanded more than 50 times to 11.4 million tons by 1900, surpassing the combined total of British and German industries. By 1913, on the eve of World War I, it surpassed the combined total of Britain, France, and Germany, becoming an undisputed steel giant.
Data source: World Steel Association
The reason why the U.S. steel industry was able to far exceed other capitalist countries in just half a century was due to the following points:
Firstly, there was a large-scale technological upgrade. Since the 1860s, including the Bessemer converter steelmaking method and the Siemens-Martin open-hearth steelmaking method were introduced, and even the story of Bessemer giving his technology to Andrew Carnegie occurred. The United States across the ocean had no gap compared to the center of the world island at that time.
Bessemer (left), Carnegie (right), and a factory using the Bessemer steelmaking method (center)
Management and operational models were pioneering. Vertical integration represented by Carnegie was written into business textbooks - through controlling the entire supply chain including raw materials such as iron ore and coal, transportation railways, and production lines, forming an integrated supply-production-sales system, making Carnegie Steel Company the "chain leader" of that era. It was in 1901 that Carnegie Steel Company merged with other enterprises to form U.S. Steel Corporation, becoming the first company globally with a market value exceeding $1 billion. Over the next 20 years, its production would increase fourfold, with its production share reaching as high as two-thirds of the national total at its peak.
Financial Committee of U.S. Steel Corporation, J.P. Morgan (fifth from left) was also one of the main figures. Image source: Harvard Business School, Baker Library
Corporate operations and organizational management constructed the micro-ecology of industry operations, while the vast geographical and industrial depth of the United States created a broad scene at the macro level. When modern American steel industry began in 1860, railway mileage had already reached 49,000 kilometers, surpassing the combined totals of Britain, France, and Germany by half a century earlier, with over 90% built within 20 years.
Railways, along with maritime and inland waterway transportation, connected various industries: aluminum, glass, automobiles, machinery, electricity, military, shipbuilding, and later emerging industries such as aviation, automobiles, appliances, and food cans... This wove a fine industrial web from energy minerals to terminal manufacturing, making steel ubiquitous and nourished by scenarios while continuously extending them, building a grand industrial model unprecedented in modern civilization.
Data source: Lu Feng, Steel Industry Transfer and China's Steel Rise - Current Characteristics and Policy Choices of China's Steel Industry, October 2016.
It cannot be denied that this stage of American protectionism did play a role. The author once reviewed the historical origins of American protectionism in "History Tells Us That China Should Not Fear the Return of Global Trade Protectionism." From 1873 to 1890, the United States never imposed less than 50% tariffs on British steel products. As Trump praised in his inaugural speech, William McKinley said: "The trophies we received are all the result of decades of protective tariffs."
McKinley (1843-1901), known for his tariffs, after Trump took office, renamed Mount McKinley, the highest peak in North America located in the central Alaska Range, back to its old name.
However, different from Trump, Bannon, Navarro, and others today, American protectionism back then was more of a temporary measure: using the "window period" of tariffs, American steel companies focused on cost reduction and efficiency enhancement as well as industrial integration. The trade wars triggered by tariffs also led American decision-makers, including McKinley himself, to begin contemplating new directions. On the day before he was assassinated, he still expressed in a speech that "commercial wars are unprofitable, and good policies and friendly trade relations can avoid retaliation..."
Take the steel industry as an example, by the late 19th century, during McKinley's tenure, with the increasing competitiveness of American steel products, import tariffs on steel began to gradually relax.
Average tariff rates for U.S. manufacturing (left) and several major products (right) from 1870 to 1913, with steel tariffs being among the faster declining ones. Yeo Joon Yoon: Tariffs and Industrialization in Late Nineteenth Century America: The Role of Scale Economies, May 2020.
Successive world wars barely touched the U.S. mainland, although there were concerns about the Great Depression, the U.S. economy continued to grow rapidly overall, standing out particularly when major countries were embroiled in the war. By World War II, the U.S. steel industry reached its peak, with cumulative production reaching 400 million tons, which was 25 times more than during World War I, five times that of the Soviet Union, seven times that of the UK, and twelve times that of Japan. By 1945, U.S. steel production accounted for 63.92% of the world total.
But amidst the U.S. transformation into a global empire, the seemingly thriving steel industry quietly entered autumn.
On the surface, in the twenty years after World War II, the U.S. steel industry continued to develop steadily, with production increasing in fluctuations, investment continuously growing, especially stimulated by the Korean War and Vietnam War, with capacity utilization rates mostly around 80%, sometimes reaching 100%.
In 1965, the stainless steel Gateway Arch of St. Louis (left), which remains the tallest man-made monument in the Western Hemisphere. And the completed World Trade Center in 1973 (right), was a steel frame tube structure. These were landmarks under the twilight of American steel.
But at this point, the entire industry was caught in the bottleneck of "big ships are hard to turn around," with outdated technical routes increasingly rigidifying, and laziness and illusions breeding in "solitary seeking defeat." American steel companies and unions had their own comfort zones, indulging in welfare and subsidies internally and excluding imports and technology externally. Their former advantages were gradually reversed by the outside world.
By the mid-20th century, American steel companies still relied on open-hearth steelmaking technology. By 1970, Japan and Europe had begun to popularize more efficient oxygen top-blown converters, while the popularity rate in the U.S. was still less than half. In 1973, Japan's steel industry had a full productivity rate 1.43 times higher than that of the U.S. From 1975 to 1980, Japan's continuous casting technology usage rate remained more than three times higher than that of the U.S. At that time, blast furnaces with a volume exceeding 3,000 cubic meters, the Soviet Union had eight, Japan had seven, South Korea had two, while the U.S. had only one.
Changes in the proportion of different steelmaking technologies (unit: thousand tons). Thanks to improvements in electric arc furnace steelmaking and scrap steel recycling capabilities, U.S. steel technology has advanced again in the past 30 years, but the scale effect is much smaller than before. Data source: Mysteel
When the U.S. became the center of the world island, it actually became less sensitive to technology.
As these more advanced and cost-effective steels sold worldwide and even exported to the U.S. market, the U.S. advantage gradually weakened, and the energy crisis triggered by the Middle East war further exacerbated the situation. By 1978, steelmaking energy costs were four times what they were in the early 1970s.
Facing its own decline and external competition, American steel companies were more enthusiastic about urging Congress to pass steel industry protection laws, setting up trade barriers to suppress the impact of imported steel. Moreover, in each round of impact, they sought government subsidies and support under the guise of environmental protection, research and development, and financing guarantees.
In addition, the U.S. extended trade barriers downstream of the supply chain. Starting from May 1981, the "Voluntary Quota Agreement for Automobiles" forced Japanese automakers to invest in establishing transnational U.S.-Japan joint ventures in the U.S. Unsatisfied, the U.S. also implemented the "Voluntary Quota Agreement for Steel" in 1984, pressuring Japanese automakers to purchase domestic steel and forcing Japanese steel enterprises to jointly establish facilities in the U.S., supplying the joint auto factories in the U.S.
This also fits our impression of American elites, who, when seemingly "righteously" accusing others of disrupting the market, had long played similar tricks themselves with great skill.
Moreover, as financial markets gained热度 gradually overshadowing the real economy, the habit of making quick money had formed. American steel giants often used profits to maintain high dividends and short-term shareholder returns rather than investing in technological upgrades. From 1970 to 1990, the R&D spending ratio of American steel companies was less than 1%, with some years even only 0.5% to 0.6%, while during the same period, Japanese companies spent between 3% and 5% on R&D.
With the rise of bosses' and shareholders' treasuries, more and more factories gradually froze in time. Calculated in 1978 dollars, the average annual capital expenditure of the U.S. steel industry from 1969 to 1978 was $2.9 billion, decreasing by an average of $300 million per year compared to the previous decade. By 1978, two-thirds of the U.S. steel-related equipment had been in use for more than 20 years, with nearly one-third exceeding 25 years of use.
This was still before the so-called large-scale hollowing out of the industry in the 1980s.
At this time, workers' benefits also became necessary embellishments of prosperity. The narrative of the U.S. was that the wages of an industrial worker could perfectly cover a family's "1234" - feeding one house, two cars, three children, and four dogs. After World War II, worker rights movements and strikes surged, and while the cake kept getting bigger, the博弈 between the U.S. government, businesses, and unions always leaked a few gold flakes in the cracks. The American Iron and Steel Institute once reported that from 1954 to 2003, over half a century, the price of steel increased by 220%, consumer price index rose by 540%, and the average wage increase in the steel industry exceeded 900%.
But wages could not keep up with the expansion of capital. The American Steel Corporation once had a "glorious record" of stock prices rising 60 times in five years. Behind such progressive victories, however, was a chart we often see - except for the wealthiest group, everyone else's relative income was steadily declining.
Data source: Reuters
For half a century, only the top 5% of earners saw their income share continuing to rise.
It was precisely under the叠加 of these factors that the competitiveness of American steel declined. As early as 1984, the main input cost per ton of steel in the U.S. had reached $403 per ton, far exceeding its main competitors.
Comparison of per-ton steel input costs among the U.S., Europe, Japan, and South Korea in 1984. Data source: Shanghai Steel Union Research Center cited from Adams and Mueller (1986, p. 107).
The aforementioned U.S. Steel Corporation, which once held the crown of industry champion for nearly half a century, was replaced by the current New Japan Steel Corporation after the 1970s. By this time, Japan's steel industry had reduced overall costs by 30% through lean production and continuous casting technology.
When the last decade of the 20th century arrived, Americans were celebrating the victory of the Cold War, but the landscape of the steel industry had undergone a complete transformation. At this time, a new manufacturing powerhouse had already begun to gather strength...
Data source: Zheng Guodong et al., Development Paths and Insights of Typical National Steel Industries, June 2021.
What follows is familiar contemporary history.
Two, The Paradox and Fate of Trade Wars
During his first term, Trump had already tried imposing a 25% tariff on imported steel, restarting some idle capacities, slightly increasing local steel prices, employment, and capacity utilization rates. Capacity utilization rates once rose from 75% to 80%.
However, behind the temporary boost, the industry as a whole was still struggling, with the import ratio of high-end steel remaining around 30%. Corporate profitability continued to decline amid oscillations, capacity utilization rates quickly fell back to 77% by 2024 after briefly breaking through 80%, and a batch of production lines represented by Granite City were hastily shut down in just five years, becoming a veritable "Kaifeng Prefecture."
Six-year revenue and net profit charts of U.S. Steel Corporation and Nucor Steel. Data source: Mysteel
The most ironic thing was that as corporate profitability declined, American steel companies began calling for greater protectionism. The then-candidate Trump naturally complied and enacted the opening scene mentioned at the beginning of this article after being elected...
Changes in labor productivity of American manufacturing (solid line for leading enterprises, dotted line for other enterprises). As shown, Trump's protectionism did not prevent the decline in production efficiency. Data source: Federal Reserve Bank of New York
In essence, MAGA's narrative deliberately simplifies the true logic of protectionism, as if "tariff increases - import price hikes - industrial return - domestic prosperity" were inevitable, avoiding reforms in production relations, reorganizations of interest groups, soils for technological breakthroughs, and reconstructions of industrial systems, becoming a new "chanting."
Furthermore, it deliberately hides the forces and counter-forces of international political economics. Not only do sovereign nations like China firmly defend their rights and retaliate, but even client states would resist to some extent to maintain their own utility value, even if faced with Trump's destructive behavior of smashing the counter and leaving nothing to "buy."
In the face of global retaliation, downstream manufacturing costs soared, leading to layoffs. According to statistics from the American International Automobile Dealers Association, the tariffs on steel and other metals alone led to the loss of at least 146,000 downstream jobs in the U.S., while the steel industry added only a paltry 12,000 jobs.
Looking back at history, the key to achieving the goals of launching a trade war lies in integrating complementary measures, including blocking core technologies, seizing key chains of the industrial chain, coordinating financial harvesting, and deploying political interference when necessary. However, America's trade wars over the past decade have gradually deviated from the direction of systematic integration, and protectionism that does not touch the soul of production relations not only fails to strengthen the physical sector but also fosters complacency. The steel industry is a significant reflection of this trend.
America's repeated trade wars have instead weakened its ability to sustainably "drain the pond to catch all the fish." Don't American voters understand this?
This is another complex issue. Even during the election period, polls showed that voters most approved of Trump's economic policy. Even now, more than four out of ten voters still approve of Trump's tariff policies.
We have reason to suspect that the大批 computer-trained grassroots labor force cultivated by America's "happy education" have become a capitalist version of "the people can be made to follow but not to know."
The McKinley presidency that Trump admired reduced the price of steel rails from $36.52 to $12 in 20 years through Carnegie Steel Company's efforts, a "magic" achieved by a comprehensive system integration of technology and management in the age of large-scale industry. Such progress transformed the U.S. from a bastion of protectionism into a more confident advocate of openness.
However, after Trump's tariff stick during his first term, the price of domestically produced steel in the U.S. skyrocketed in 2021, reaching 68% higher than the global market average by the first quarter of 2021.
Comparison of U.S. steel prices with those of China, Europe, and Japan (unit: USD/ton). Data source: Steel Union Data
Recall the distribution of steelmaking technologies in different phases mentioned earlier. Since the 1970s, electric arc furnace steelmaking has gradually become mainstream. The U.S. Nucor Steel Company, which bet on this technology route back then, grew into the largest steel company in the U.S. Its executives once publicly mocked steel trade protection policies in 1986:
"Once prices start to rise and steel companies begin to make profits, they stop modernizing. Unless you're under intense competitive pressure, making it a matter of survival for the enterprise, you'll repeat the same mistakes, with no other answer."
Now, it has become a new advocate of trade protection.
Quoting a public opinion style: What kind of system and environment could turn a generation of dragon-slaying warriors into dragons?
Trump displays the signed bill
Three, Inspiration and Expectation for the New Path of "Breaking Out of the Cocoon"
In 2019, an explosion echoed in Bethlehem, Pennsylvania, USA, reducing the headquarters of the former second-largest steel company in the world, Bethlehem Steel, to ashes.
The Bethlehem plant, already rusted before its explosion, was even written into the bestseller "Rust: The Longest War of Humanity" in the U.S.
Little known is that this steel mill has a deep connection with China more than a hundred years ago. It was in August 1911 that the Qing Dynasty on the verge of collapse secretly signed the Bethlehem Contract with the factory, agreeing to provide loans from the factory on behalf of the U.S. government for the development of Chinese naval construction. The contract also stipulated that the factory would assist in improving China's manufacturing, gunpowder, and dock facilities.
This contract indicated that by the early 20th century, China had gradually understood the importance of steel and its downstream production lines, no longer simply satisfying itself with the procurement of finished industrial products.
However, subsequent chaotic situations left China's steel industry still like a vague dream.
Until 1949, China's total steel production was only 158,000 tons, accounting for 0.1% of the global share, with less than six taels per capita, not enough to make a single kitchen knife.
Do you remember the U.S. steel production in 1873 mentioned at the beginning? — 220,000 tons.
This was the starting point of China's steel industry.
The next year, China's steel production reached 610,000 tons, quadrupling. In 1952, during the height of the Korean War, production reached 1.329 million tons, surpassing the historical highest levels in other major agricultural and industrial products.
In September 1958, the first large blast furnace of the first large steel base built by New China flowed out the first molten iron in Wuhan. Chairman Mao had said beforehand, "I will visit three times if necessary to see you produce iron!" At that moment, he and over 3,000 workers and the masses of WISCO witnessed it together. "The Iron General taking command" became the favorite analogy used by the elder when describing modernized industry.
A turbulent chapter of history thus unfolded and continues to this day.
By the 1990s, China had become the largest steel producer in the world. Meanwhile, Bethlehem Steel's various production lines in the U.S. began to close or sell starting in 1996, until they were completely closed in 2003. History completed its profound cycle in an不经意 way.
Data showing steel production histories of various countries and regions worldwide. It can be seen that trade protection had limited stimulation on U.S. capacity, while world steel production is highly synchronized with China. Data source: World Steel Association
Like the U.S., the rise of China's steel industry also depends on the surge in scenarios, especially the rapid industrialization and urbanization after 2000 driving a sharp increase in steel demand. Accelerated infrastructure construction, expansion of manufacturing, export-oriented needs, from household appliances to automobiles, all promoting various consumption scenarios, continuously boosted steel consumption, stimulating capacity expansion and technological upgrades.
However, as a latecomer country with a lower starting point than the U.S. in the 19th century, China was destined to take a more thorny path of catching up. Even by the early 21st century, a decade after becoming the world's largest steel producer, the industry still faced problems similar to those of decades past: insufficient industrial concentration, even reverse concentration; significant gaps in production volume, quality, variety, and specifications of high-value-added products; gaps in original development and engineering of new industries, new equipment, and new technologies; relatively high enterprise energy consumption and larger gaps in environmental protection, which are detrimental to sustainable development.
These issues cannot be said to have been fully resolved even today. With the arrival of the development transition period, bottlenecks in China's steel industry development also present multiple overlapping cycles in complexity similar to macroeconomic fundamentals. Moreover, China's natural dependence on raw materials means that issues such as securing supply chains, breaking through technology, digesting capacity, optimizing organization, and competing for pricing power remain to be addressed. Behind these challenges lies a major exam for how a country can achieve compatible resource allocation between traditional industries and new technologies and models in the age of informatization and intelligence.
I have always believed that there is no hierarchy or inferiority among industries. Traditional manufacturing and basic processing industries, as the trunk and meridians of the real economy, respond and interact with various production and living scenarios, which is essentially a transformation of metabolism and health in an economic body. Basic industries can embrace high-tech iterations and development, and production and processing can realize integration with other industries and release scale effects.
We do not deny the necessity of promoting international division of labor and relocating a certain scale of capacity, but this does not mean that any industry can be arbitrarily labeled or divided into grades. Moreover, it is not that with economic development and technological progress, industrial countries should send out all their physical industries and enjoy so-called lifestyles. In fact, it has been proven that fewer and fewer people can enjoy such lifestyles.
The consequences of abusing the "雁行 theory" are gradually surfacing with various anomalies represented by Trump's tariffs and the "rust belt" dir