So much for President Bush’s pledge not to hike taxes. The best that can be said about the Administration’s recent decision to protect the domestic steel industry with high tariffs—a tax on American consumers of steel such as automakers and car buyers--is that the policy could have been worse. Big steel lobbied hard for a 40% trade barrier. Instead, the industry only got an 8% to 30% tariff on a range of products, with exceptions carved out for a number of developing nations, including NAFTA partner Mexico.

The Administration’s political calculation is clear and the domestic power play understandable. Bush wants to shore up support for Republican candidates in steelmaking states such as Ohio and Pennsylvania before the upcoming Congressional elections. Yet the price tag for dropping free trade principle to political expediency is too high. Protectionism invites economic stagnation.

The Administration has lost political capital at home and abroad. A long line of “vital” industries to the nation’s security is forming on Capital Hill, all calling for greater protection. If steel can tax consumers, why can’t agriculture, textile, timber, and other industries also squeezed between falling prices and too much capacity? The Administration’s action risks a debilitating round of retaliatory measures from other countries, and weakens its moral negotiating authority during future international border-opening initiatives.

The economics are even worse. The measure will destroy more jobs in the steel-using sector of the American economy than it will save among steel-producers. Freer trade and open borders played a critical role in underpinning America’s prosperity in the 1990s. World trade soared with the collapse of communism, the embrace of freer markets by much of the developing world, the completion of the North American Free Trade Agreement, and the creation of the World Trade Organization. America's manufacturers grabbed a growing share of global trade. Service companies, such as architects, software developers, investment bankers, and educators found profitable opportunities in the global economy.

Consumers typically benefit from freer trade through lower prices and increased choice. A trip to Home Depot or a car buying expedition would be far less pleasurable and much more costly if it weren’t for foreign competition. Trade invigorates economic growth, too, by encouraging the spread of new ideas, new technologies, and new ways of doing business.

Bush’s steel policy of protectionism drains consumer purchasing power and indulges an industry’s most inefficient companies. Big mistake.