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Trump to impose tariffs on steel, aluminum: Update

01 Mar 2018 23:04 GMT
Trump to impose tariffs on steel, aluminum: Update

Adds context

Houston, 1 March (Argus) — President Donald Trump today said the US will impose import tariffs of 25pc on steel and 10pc on aluminum next week, moving to counter what he calls an "unfair" global trading system that has battered the American steel and aluminum industries.

"We'll be signing it next week," Trump said, without providing further details. "And you'll have protection for a long time."

The move comes as part of the administration's investigation into the impact of imports of steel and aluminum on US national security. The administration last April launched its investigation under Section 232 of the 1962 Trade Expansion Act. The act broadly empowers the president to restrict imports that threaten to impair US national security by injuring national defense-related producers directly or by weakening industries important to the economy at large.

Trump made the announcement following a meeting with executives from major US steel and aluminum producers at the White House.

Trump came into office in January promising to roll back what he called "American carnage" in the industrial heartland by regenerating the manufacturing sector after more than two decades of decline. He has targeted US multilateral trade agreements, including Nafta, saying he wants to renegotiate them to gain better terms for American industry and workers.

Commerce Secretary Wilbur Ross in January recommended a range of options for the president to consider after the Section 232 probe, from a blanket tariff of at least 24pc on steel imports and at least 7.7pc on aluminum imports from all countries and products to more targeted tariffs and quotas on specific nations and/or products.

Trump's announced tariffs exceed the Commerce Department's recommendations. It is not clear whether the tariffs will apply to all finished and semi-finished products from all countries or be more targeted.

Steel executives touted the need for tariffs to level the playing field.

"We are not protectionists. We want a level playing field," US Steel chief executive David Burritt told reporters at the White House.

"The cheating is phenomenal. The amount of circumvention that takes place is incredible," Nucor chief executive John Ferriola said.

US producers have historically focused circumvention complaints against China, whose monthly steel output rivals annual US output.

Critics of Trump's proposals suggest that aggressive tariffs would increase the price of steel and hurt downstream industries such as energy and automotive that rely on steel and aluminum.

"The history of tariffs is that they typically hurt the consumer, and have the potential to cost many more jobs than they save," Texas Senator Ted Cruz, a Republican, told reporters. "There are a lot more jobs in America that depend on manufacturing and energy than are directly related to steel."

Critics point to tariffs as high as 30pc imposed by President George W Bush on steel imports in early 2002, which they said led to higher steel prices that hurt the economy and threatened to start a trade war as other nations considered tariffs of their own. Countries around the world are expected to retaliate in similar fashion against Trump's move.

Originally slated to remain in effect until 2005, Bush lifted the tariffs in late 2003 after they were declared unlawful by the World Trade Organization.

US steel imports rose in the last decade, peaking in recent years at 39mn metric tonnes (t) in 2014.

In 2017, imports rose by 15pc to 33mn t. Finished steel import market share ticked up to 27pc in 2017 from 26pc a year earlier, according to estimates by the American Iron & Steel Institute (AISI).

Import activity ticked up after the Section 232 investigation was launched as exporters rushed to get products into the US before restrictions were imposed. But import offers have slowed amid buyer apprehension as Trump's 232 decision loomed.

US benchmark hot-rolled coil prices surged over the last two quarters, climbing by as much as $200/short ton to upwards of $800/st in March. Mills are expected to continue to leverage their pricing power as Trump's tariff is implemented until prices reach levels where imports are again cost competitive.