Paving the way for Higher Costs? The Impact of Steel Tariffs on Highway Procurement. 90 views

This dissertation examines how protectionist trade policies raise public procurement costs. I study the 25% tariff on steel imports imposed by the U.S. in 2018 and its impact on highway procurement, a setting where contractors are generally required to use domestically produced steel. U.S. steel production is highly concentrated in the Midwest, whereas coastal states are highly reliant on imported steel. By shifting demand from foreign to domestic steel, the tariffs placed upward pressure on domestic steel prices, an effect felt most acutely in import-reliant coastal states. Using line-item bid data from procurement auctions in five states, I find that the tariffs sharply increased steel rebar bids in import-reliant coastal states, with bids rising by approximately 24% in California—roughly equivalent to the tariff increase—but had no effect in the Midwest states of Indiana and Michigan. To quantify the channels through which tariffs raise procurement costs, I estimate an empirical auction model using data from California and Michigan. I find that the California Department of Transportation incurred an additional $100 million in highway construction costs after the tariffs—an increase of 6.8%. Thirty percent of this increase is attributable to reduced bidder entry, which weakened competition and allowed firms to bid less aggressively. These effects are absent in Michigan. The results highlight that protectionist trade policies can substantially raise public procurement costs, particularly in import-reliant states.

PHD (Doctor of Philosophy)

trade policy; procurement auctions; infrastructure costs; tariffs; steel

2026-04-14