Steel sector cautious as Trump withdraws from TPP, targets Nafta
President Donald Trump has scheduled meetings with the leaders of Canada and Mexico to begin renegotiating the terms of the North American Free Trade Agreement (Nafta), he said.
He also signed an executive order withdrawing the USA from the Trans-Pacific Partnership (TPP), a multilateral trade deal that former president Barack Obama had hoped would counter China’s growing influence in Asia, according to media reports.
The president may officially undertake the reworking of Nafta with another executive order on January 23, media reports said.
“We are going to start some negotiations having to do with Nafta,” Trump said on January 22 during a swearing-in ceremony for White House advisers. “We are going to start renegotiating on Nafta, on immigration and on security at the border.”
Details on proposed changes to Nafta by the Trump administration were not immediately clear.
“If today is any indication of the Trump administration’s focus on manufacturing, it is an encouraging start,” Scott Paul, president for the Alliance for American Manufacturing, said in a statement. “Withdrawing from the TPP is a first step in a long road toward reforming trade policy.”
But ditching TPP was likely a foregone conclusion, given the bipartisan opposition the trade deal faced during the presidential campaign, Philip Bell, president of the Steel Manufacturers’ Association (SMA), told Metal Bulletin sister publication AMM in a January 23 telephone interview. Scrapping TPP allows Trump to make good on a campaign pledge without risking political capital, he said.
“If he [scraps TPP …] and then takes a more judicious approach about Nafta, I think that will go a long way to calm the markets and show that he is going to be very measured in his approach to trade,” Bell said.
Shares of most steelmakers and service centres with significant US operations were down in early afternoon trading on January 23.
Nafta is more than 20 years old and is due a re-evaluation, Bell said. Nonetheless, Trump should take more care with Nafta than he has taken with TPP, he said.
“It has its pluses and minuses. But it’s essentially been a net positive for the domestic steel industry,” Bell said of Nafta.
As a result, US steelmakers have operations across the USA, Canada and Mexico, Bell said, noting that they also stand to benefit from significant opportunities in Mexico’s automotive sector.
“We hope this is a methodical, almost surgical process that looks at Nafta very carefully and comes up with ways to make it better,” Bell said. “One of the reasons we feel that way is that Nafta – no matter what you feel about it – has integrated North American supply chains.”
The potential trade shake-up comes after Trump pledged a “new decree” of “America first” on trade policy during his inaugural address on January 20. Trump has pledged to bring manufacturing jobs back to the USA by scrapping or reworking international trade deals such as Nafta and TPP.
Commerce Secretary nominee Wilbur Ross said last week during a Senate confirmation hearing that Nafta was overdue for a “re-opener”.
“The United States should solidify relationships in its own territory in the best way possible before going off to other jurisdictions,” he said.
But the stakes of opening up Nafta could be high. Withdrawal from the deal or the implementation of punitive tariffs could result in the loss of at least 31,000 US automotive and parts jobs, the Center for Automotive Research (CAR) said in a recent study.
In a meeting with manufacturing executives on January 23, Trump said he would cut taxes and regulations “massively” as an incentive for them to remain in, or to bring operations back to, the USA. He also threatened a “major border tax” for companies that moved jobs or facilities abroad.
“What we want to do is bring manufacturing back to our country,” Trump said. “We want to start making our products again. We don’t want to bring them in. We want to make them here.”
US Steel Corp president and ceo Mario Longhi was among the officials attending the meeting, a spokeswoman for the steelmaker confirmed in an email.
Also in attendance were Klaus Kleinfeld, chairman and ceo of New York-based aluminium and titanium parts maker Arconic Inc, and Mark Fields, president and ceo of automaker Ford Motor Co.
“We had a very open conversation with President Trump and members of the new administration,” Kleinfeld said in an emailed statement. “I was encouraged that the first meeting on the first full week of the Trump administration was focused on how to increase the competitiveness of US manufacturing firms. We look forward to working with the new administration to further strengthen advanced manufacturing in America.”
Trump said he hoped to hold similar meetings every quarter.