Trump signs 232 tariffs, causes cheers and jeers
Steel and aluminium tariffs that will sharply raise prices of both materials have been signed into effect by President Donald Trump, to US domestic industry cheers and downstream jeers.
Trump signed off on the blanket tariffs—25% on steel imports, 10% on aluminium imports—that he announced last week in response to the Section 232 investigation into steel and aluminium imports on a national security basis, but excluded North American Free Trade Agreement members Canada and Mexico. The tariffs will go into effect in 15 days.
The US is also “open to removing or modifying individual tariffs on countries” on a case-by-case basis, in negotiations led by US Trade Representative Robert Lighthizer. Trump did not mention whether certain products would be open to exemptions.
“We’re going to see who is treating us fairly and who is not,” said the President on Thursday, March 8, adding that the US will “show great flexibility….We just want fairness.”
Steel and aluminum articles as defined in the proclamation cut across a broad swatch of products.
Steel Harmonized Tariff Schedule code 7207 for example is defined as “semi-finished products of iron or non-alloy steel containing by weight less than 0.25 percent of carbon.” There has been wide discussion about the inclusion or not of semi-finished steel in the tariffs.
The domestic steel and aluminium industries applauded the news, proclaiming that the US would no longer be on the losing end of trade deals and heralding the return of manufacturing to the nation.
“With the signing today, the steel industry can be on track to maintain our essential contributions to national security and critical infrastructure like transportation, public health and safety, energy and the power grid—all of which rely heavily on steel,” Thomas J. Gibson, president and CEO of the American Iron and Steel Institute, said in a statement.
“By signing steel tariffs today, President Trump is empowering our country to finally fight back in the trade war already launched against us by cheating countries like China,” Todd Leebow, president and chief executive officer of Majestic Steel USA, said in a statement.
“This action by the President could not come soon enough,” AK Steel CEO Roger K. Newport said in a statement, noting that electrical steel imports almost doubled in 2017 vs 2016.
“Competing on a level playing field will enable us to keep doing what we have been doing for five decades—invest in our teammates, our facilities and new technology,” Nucor president and CEO John Ferriola said in a statement.
Indeed, Trump said during the signing ceremony that Century Aluminum will invest more than $100 million in its Hawkesville, Kentucky, smelter, which will ramp it up from 40% of capacity to 100%. The company had said in February that it would restart the plant if Trump chose to enact certain Section 232 trade remedies.
Steel Manufacturers Association president Philip Bell said in a statement that “our members are excited to grow production, open new facilities and reopen idled mills once effective measures are implemented.”
U.S. Steel announced on March 7 that it is restarting one of two blast furnaces at the steelmaking facilities of its Granite City Works in Illinois in response to Trump imposing tariffs on imported steel.
But other industry participants were concerned about the tariffs, fearing higher prices and the prospect of a trade war.
Indeed, US hot-rolled coil prices have surged in recent weeks in anticipation of the results of Section 232. American Metal Market’s hot-rolled coil index rose to $41.56 per hundredweight ($831.20 per ton) on March 8.
Hot-rolled coil prices have the potential to soar to $50 per cwt ($1,000 per ton). “Some of our channel checks indicate the potential for U.S. HRC prices to hit $1,000/st, but we see the restarting of capacity in the U.S. likely causing prices to pullback from that level,” Cowen analyst Novid Rassouli wrote Thursday, March 8.
If hot-rolled coil prices do reach such levels, “then any country in Europe or Asia can pay the 25% and still make money,” one Canadian mill source said. “I’m in fact worried that a lot of material will rush in.”
Some consumers aren’t welcoming the potential price hikes. “We believe this step to be injurious, rather than helpful, to our efforts to increase American manufacturing and create jobs,” the president and CEO of the Air-Conditioning, Heating, and Refrigeration Institute, Stephen Yurek, said in a statement.
Nafta partners being excluded meanwhile got positive reactions from some corners. “The temporary exemption for our trading partners in Canada and Mexico is a step in the right direction,” Governor Matt Blunt, president of the American Automotive Policy Council, said in a statement, adding that he encouraged the administration to a take a “targeted approach” against countries in order to protect jobs in the US automobile industry and in the supply chain.
“We look forward to educating the Trump administration on the vital role the Japanese steel industry plays in the American marketplace,” Tadaaki Yamaguchi, chairman of the Japan Steel Information Center, said in a statement. He added that Japan “is not part of the import problem but a solution.”
The 232 won’t fix the steel industry’s problems, Russell Egge, founding partner of research consulting firm Egge & Alexander Associates, told American Metal Market. “People have been blaming imports since the 1950s … but imports are not the main problem facing the steel industry right now.”
The problem is not how many tons come in from abroad, it’s profitability per ton—and on an operating basis, there isn’t much difference among US mills. That means there isn’t a huge advantage to being a low-cost producer or a big penalty for being a high-cost producer, Egge said.
What mills should focus on is not imports but instead technological innovation and managing their mix to make the steel products that are the most profitable, he said.
Michael Cowden, Chicago, contributed to this report.