Question

Big steel firms were initially against the steel tariffs, despite the fact that they would seem to benefit from higher domestic steel prices. Later, they change their stance to favor steel tariffs. later favored steel tariffs. What might explain why they weren’t in favor of steel tariffs throughout the period?

Answer 1

Steel firms weren’t in favor of steel tariffs because if there were tariffs on imported steel, and the steel market faced a shortage and a possible price hike, the industries using that steel would face increased production cost such as the automobile and shipping industry. When they use expensive steel, price of automobiles is likely to go up and this was expected to bring a reduction in sales. In the short run it was expected to bring down the revenues for these big steel firms, because, even though they would be selling at a higher price, they would be selling only little steel so the overall surplus would have been reduced. Hence, initially they opposed.