Thanks to Henry Dubb of “The Proletariat” for bringing this article to my attention. This may seem like a small matter, but it’s an excellent example of what tariffs can do for our economy.
To summarize, the U.S. imposed a tariff on Chinese wire coat hangers after the lone remaining U.S. manufacturer, about to go under, complained that the Chinese were “dumping” hangers (selling in the U.S. at a loss) on the U.S. market. The Commerce Department investigated, escalated the case to the U.S. International Trade Commission, and the result is that tariffs were imposed on the Chinese hangers. What may be even more significant is what was not included in this process. There was no involvement of the World Trade Organization (WTO).
The result is a new lease on life for M&B Hangers in Leeds, Alabama.
A flood of cheap Chinese hanger imports in recent years has forced all but one major U.S. hanger manufacturer out of business. M&B Hangers in Leeds, Ala., hung on.
In 2006, U.S. shipments of wire hangers were valued at $40.39 per 1,000, compared with $31.69 per 1,000 for shipments from China, according to the U.S. International Trade Commission. Last year, the United States imported 2.7 billion wire hangers from China — up 52 percent from 2006.
M&B President Milton Magnus III complained to the U.S. Commerce Department that Chinese manufacturers were dumping hangers well below market value. In March, the government responded by imposing a tariff on all wire hangers from China.
“I had almost come to the realization that we couldn’t make hangers in this plant anymore,” Magnus says.
Today, M&B is thriving. It makes more than a million hangers a day, and Magnus expects to double his work force in two years. But that still isn’t enough to meet the demand.
Let’s do some math here. The total U.S. demand for wire hangers by dry cleaners is about 3 billion hangers per year. That’s an average of about 10 hangers per capita. Now, if the price of domestically-made hangers is $40 per thousand, which is $10 more than the imported Chinese hangers, then the added cost per capita is only ten cents per year. But if all hangers are made in the U.S. at this higher cost, then $120 million is kept in the American economy. Assuming that one tenth of this figure is profit for the hanger manufacturer, then the cost to produce those hangers was $108 million. Assuming 2/3 of this cost is labor (a fairly typical figure), then $72 million is added to American payrolls, which is 24 cents per capita. The net result? For a cost of only ten cents per capita to keep manufacturing in the U.S., American wages rise by 24 cents per capita!
That’s just the monetary savings. What about the impact on the environment? How much oil is saved by not shipping these things across the Pacific Ocean? It takes about 1500 gallons of fuel to move one ton of freight across the Pacific Ocean. Three billion coat hangers weighs about 100,000 tons. So by manufacturing these coat hangers domestically, we eliminate the burning of 150 million gallons of fuel per year! That may not seem like that much compared to the world’s total consumption of oil, but we’re only talking about coat hangers here. Imagine the savings if this were applied to every imported product!
The point of all of this is that tariffs still work, just like they did for the first 170 years of our nation’s history. A tariff structure indexed to population density and applied only to manufactured goods, as I’ve proposed in Five Short Blasts, would wipe out our $500 billion per year trade deficit in manufactured goods and result in an economic explosion in this country beyond most people’s wildest imagination. Just imagine what an infusion of $500 billion, four times as large as the government’s “economic stimulus” plan and applied not just once but year-in and year-out, would do for this country.