Since US President Donald Trump lit the blue touch paper on 25% tariffs on imported steel into the USA, there have been mixed emotions from the global steel industry.
It goes without saying that the US steel industry and its leading trade associations, the Steel Manufacturers Association (SMA) and the American Iron & Steel Institute, are fully supportive of the action taken by President Donald Trump. Elsewhere in the world it’s a different story.
Philip K Bell, president of the SMA, North America’s largest steel industry trade association, and the primary lobbying vehicle for electric arc furnace steelmakers, commented: “We are optimistic that these tariffs will adjust imports to provide a level playing field and ensure that the steel industry in our country is able to serve our national security needs.”
According to Bell, “We look forward to the measures being in effect for a period of sufficient duration for companies to reinvest in the steel industry. We also support limited exceptions for key allies, including Mexico and Canada, well-regulated exclusions for products not available from US producers, and mechanisms to avoid transhipment and circumvention of the tariffs. Effective measures will allow the domestic industry to preserve and strengthen its national defense industrial base.”
Bell goes on to say that US producers have faced a ‘relentless inflow of imports’ due to global excess capacity created by foreign government subsidies and unfair practices, arguing that China has rapidly expanded capacity and shifted exports onto global markets.
US imports of steel increased 15% in 2017 when compared to the previous year and accounted for more than a quarter of US steel consumption. US capacity utilisation averaged 75% in 2017, an operating rate deemed far below the 85% necessary for a healthy industry.
Bell describes Trump’s tariff announcement as ‘decisive action necessary for US steel producers to survive and thrive’.
Thomas Gibson, president and CEO of the AISI, was equally triumphant, claiming that Donald Trump’s action was ‘key in stemming the tide of unfair foreign imports and putting steel workers back to work.
Gibson cited US Steel’s Granite City, Illinois, steel plant as an example of how Trump’s decision was starting to make good sense. One of the plant’s blast furnaces will be restarted having been idle since December 2015. “The [US] 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,” he said.
But elsewhere in the world, it’s a different story.
Damaging and counterproductive
The European Union (EU), which includes the UK until March next year, has described the tariffs imposed by the USA as ‘damaging and counterproductive’ for both the US and EU economies. The EU and Canada are the largest exporters of steel to the USA so it’s understandable that EUROFER’s director-general, Axel Eggert, is more than a little miffed.
“The US measure baselessly includes EU producers, who will suffer significantly from the loss of one of its major export markets,” Eggert said, adding that the national security justification used by Trump was ‘an absurdity’.
Eggert has two major concerns: one is the loss of exports to the US; and the other is the expected massive import surge in the EU that could cost ‘tens of thousands of jobs’ in the EU steel industry and its related sectors. “Ironically,” he said, “estimates also show that the US could also suffer a net loss of jobs as a result of the measure.”.
It goes without saying that the EU will respond in kind in order to defend its own steel industry and this could quite easily be the beginning of a global trade war. “We can’t sit idly by while the US lights a match under the global trading system,” said Eggert.
EUROFER asserts that the EU has been a long-term, fair and reliable supplier of high quality steels to the US market and that European trade in steel is neither dumping, nor a threat to US national security ‘by any stretch’.
In the UK, Gareth Stace, director of UK Steel, said he had hoped for a more targeted and focussed approach to tariffs.
“Regrettably today’s announcement confirms our fears that the default position is for tariffs to apply across the board outside of NAFTA,” he said, adding that such tariffs would have a profound and detrimental impact on the US steel sector.
UK steel manufacturers exported 350kt to the USA in 2017, representing 7% of total exports.
“Imposing such measures on US allies in the name of national security is difficult to comprehend,” Stace argued. “It is clear the underlying motivation is instead one of economic protectionism for US producers, in response to a global issue of overcapacity in the steel sector.”
Stace is encouraged by the US administration’s hint of flexibility and that exemptions might be granted and, he said, it was vital that the EU and UK authorities do all they can to deliver this.
He called for ‘swift action’ from the EU Commission to combat the indirect effects of the planned tariffs and added: “We must ensure our market is not now destabilised by millions of tonnes of steel diverted away from the US to the EU,” he said, adding that he hoped for support from the UK Government.
Roy Rickhuss, general secretary of Community, the UK steelworkers’ union expressed disappointment at the news that the UK will not be initially exempt from new US tariffs on steel. He referred to Trump’s strategy as short-sighted and argued that the USA should not be attacking its allies when it should be working in unison with the UK and EU on tackling ‘the problems of global overcapacity’.
Rickhuss called on Prime Minister Theresa May and International Trade Secretary Liam Fox to use every bit of influence they have left to protect the jobs of British steelworkers.
Fox is in the process of planning a trip to Washington to discuss the new duties and will seek an exemption on both steel and aluminium exports to the USA. He believes there are other ways to deal with the global overcapacity issue.
Stephen Kinnock, MP for Aberavon, home of Tata Steel UK’s Port Talbot integrated steelworks, criticised the UK Prime Minister Theresa May, claiming that the British Government has been found wanting on the steel issue.
“Theresa May has, again, let down British steelworkers. Ever since Trump first announced punitive tariffs on steel and aluminum last week, the British steel industry, unions and steel MPs have been calling on her to make the case against these tariffs and for a UK exemption. Tonight we learnt that she has abjectly failed in that task,” he said.
Kinnock continued his onslaught on the Prime Minister: “She was quick to hold Trump’s hand in the White House last year, but she has shown that she hasn’t got what it takes to force his hand on steel tariffs or do what is required to protect and support the British steel industry,” he said.
Meanwhile, in Scandinavia, Swedish steelmaker SSAB’s CEO Martin Lindqvist claims that the company’s Americas division, which has a production capacity of 2.4Mt at two plants in Iowa and Alabama, will have ‘these volumes’ excluded from Trump’s tariffs.
“However, our US steel production is supplemented with special, high-strength products from Sweden and Finland that are not produced in our North American product lines,” Lindqvist said, explaining how exports to the US from these plants will be subjected to the new tariffs. “We will investigate the impact to our business and discuss with our customers the best way to go forward given yesterday’s announcement,” Lindqvist said.
SSAB claims that its Nordic US exports are traded fairly, following established international rules of trade. Lindqvist claims that the company has enjoyed a positive trade relationship for many years and will engage with US government officials ‘to advocate for the preservation of this important US-Nordic trade relationship.’
Lindquist said he would continue to evaluate SSAB’s American business – from pricing and investments to logistics and operations –‘to ensure our business remains profitable and best poised for future growth’.
There has been worldwide condemnation of Trump’s 25% steel tariffs. In Japan they are saying it will have a ‘big impact’ on the two countries’ close bilateral ties, while the South Koreans are considering filing a complaint to the World Trade Organisation. China claims it will review the situation and ‘firmly defend its legitimate rights and interests’, according to the Chinese Ministry of Commerce.
Shares in South Korean steelmaker POSCO dipped more than 2%, but Nippon Steel & Sumitomo Metal’s shares were slightly up.
In addition to the European Union seeking exemptions, so will Brazil and Argentina and Japan.
But all is not lost. Trump is planning to issue waivers to nations he regards as ‘real friends’ of the USA and has already exempted Canada and Mexico, fellow members of the North Atlantic Free Trade Agreement (NAFTA).
This really is one of those ‘only time will tell’ situations as, just like in Stingray, a children’s adventure series from the 1960s, ‘anything can happen in the next half hour’.