The Steel Story

The plan was to release the details of the steel tariff plan at the end of June. As of mid-August the plan was still not in place. As expected, this complex issue is not easily resolved, and in the last several months there have been comments from a variety of affected industries. The plain fact is that there are far more consumers of steel than there are producers, and they have all been making their opinions known.

The motivation for the tariffs is a belated attempt to rescue the domestic steel business. Over the last few decades, the U.S. steel industry has been fading and steel consumers have been buying cheaper imported steel. Even if the foreign steel was not always cheaper, it was available, and the U.S. producers could not always keep pace. The case for the steel tariff has been made around national security as the U.S. doesn’t want to be dependent on foreign sources. Given that most of the steel coming into the U.S. is from allies such as Canada, Mexico, and Japan, this is a
weak argument.

What is likely to happen now? It would be an embarrassment to abandon the whole effort, and Trump seems unwilling to take that step. Those that do not want to see major shortages of steel and price hikes are pushing hard for exemptions, and they have gotten some already. The steel-using sectors are making their case aggressively and suggesting they will lose jobs. The best estimate is that a final decision will not come for months, and the end result will be far less comprehensive than was originally outlined, with perhaps a sliding scale of tariffs.

Meanwhile, there are discussions regarding what the steel sector in the U.S. really needs in order to be competitive in the future. The strict environmental rules that prohibit scrapping of ships in the U.S. would be a good place to start, as most of the U.S.’s current ship work is done in other nations, such as China. That has included the scrapping of U.S. warships.

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