Nucor chairman, president and chief executive officer John Ferriola said he had a “great deal of confidence” in the June 1 deadline because he spoke with Trump in person roughly a week ago about Section 232. “This topic came up, obviously... And he made a commitment again to me that they would not move off of June 1,” Ferriola said.
But some countries might be given another extension “if the administration believes that they are close to successfully negotiating a bilateral agreement,” he said. Ferriola did not say which countries might be close to reaching bilateral trade pacts with the United States.
He made the comments during a keynote presentation at Great Designs in Steel, an annual automotive conference held on Wednesday May 16, in Livonia, Michigan, and attended by approximately 1,750 people.
Peter Navarro, the director of the White House Trade Council, has said that countries that aren’t subject to Section 232 tariffs - 25% in the case of steel - will be subject to a quota. Previous temporary Section 232 exemptions had been scheduled to expire on May 1 but were extended for 30 days for Canada, Mexico and the European Union.
Bring the trade war
Ferriola swatted aside the potential of Section 232 sparking a trade war. “Let me make no doubt about this: We are in a trade war - and we are losing a trade war,” he said.
Putting quotas or tariffs on steel exports from allies such as the EU is reasonable, given that the EU imposes a 25% value-added tax (VAT) on US steel exports, Ferriola said, noting that Germany imposes a VAT a notch lower at 24%.
“So I struggle [to understand] when people say that we are doing something that is terribly unfair to our allies and our trading partners when we pay a 25% penalty by a different name,” he said.
Nucor would see only “minimal” impact, he said, from Section 232 tariffs or quotas versus Canada or Mexico, even though it has operations in both countries. Nucor's plants in each nation “serve the local market,” he added.
Nucor’s galvanizing joint venture in Mexico with Japanese steelmaker JFE, for example, serves the Mexican automotive market, Ferriola said.
Sources have told American Metal Market that Canada and Mexico - the United States’ partners in the North American Free Trade Agreement - want either no quota or one of at least 100% of their average annual exports to the US. They say anything less than that might be seen as a non-starter.
American Metal Market has also been told that the Commerce Department offered the EU a quota of 90% of the region’s average annual exports to the US from 2015-2017. Germany might have been willing to accept that quota ceiling, but other EU members were not, sources said. A European Commission spokesman declined to comment because negotiations were “an ongoing process.”
POTUS, don’t break your promise again
Ferriola said he was disappointed that Trump didn't stick to the May 1 deadline. “If we don’t live up to the commitments that we make - particularly the president of the United States - we start to lose credibility around the world,” he said.
He said his greater confidence in the June 1 date stems in part from discussions with other top administration trade officials. Commerce Secretary Wilbur Ross on the phone three days ago “assured me that the June 1 date will not slip," Ferriola said. And he noted that Navarro was “adamant” about the June 1 deadline when the two met three weeks ago.
Larry Kudlow, director of the US National Economic Council, might have a “little different” view of the tariffs, Ferriola said, “but his commitment to supporting the president is also strong, so I believe that he will support [the Section 232 measures]."
Section 232 tariffs are necessary, said Ferriola, because of the “tremendous” steelmaking overcapacity globally and particularly in China, which produced 40 million tons of steel in 1980 and now churns out 900 million tons per year - approximately 10 times more than the 90 million tpy the US produces.
Consumers need Section 232, too
Steel consumers such as automakers might need the same tools in the future, given that China’s overcapacity is not limited to steel. The country, which made no cars in 1980, made 30 million in 2017 - accounting for about one-quarter of the world’s production - Ferriola noted. And the largest four auto producers in China are owned by the Chinese government. “What we are struggling with today … very possibly you could be facing tomorrow,” he said. That’s why Nucor thinks it is important to support "comprehensive" trade remedies such as Section 232, he added.
“So when you face this situation, the trade laws that we have in place - that are currently being abused - will be enforced more stringently,” he said. And Nucor's CEO said his company plans to be a supplier to the automotive industry for the foreseeable future, especially given its financial strength. “We assure you that we will be around,” he said, noting that the company has invested $4 billion in its automotive business over the last eight years. The result: “Our quality rivals anyone in the world.”
The automotive sector is often seen as one of the last bastions of integrated steelmakers. But mini-mills such as Nucor are increasingly pushing into that market, too, thanks in part to the increased use of virgin iron units such as direct-reduced iron.
US President Donald Trump told Nucor's top executive that Section 232 exemptions won’t be extended beyond June 1 - unless trade talks are progressing.