Play Live Radio
Next Up:
0:00
0:00
0:00 0:00
Available On Air Stations
Contact 90.5 WESA with a story idea or news tip: news@wesa.fm

Experts Say Steel And Aluminum Tariffs Could Help Some Producers, But Squeeze Downstream Industries

Gene J. Puskar
/
AP
In this Nov. 16, 2008 file photo, United States Steel Corp's. Edgar Thomson Works in Braddock, Pa. is shown.

Fears of a trade war were among the reactions to President Trump’s signing Thursday of a proclamation ordering new tariffs on imported steel and aluminum. 

But experts say that while domestic metals producers – like Pittsburgh-based U.S. Steel and Alcoa -- might benefit, other, more subtle effects of the tariffs could also have an impact on American corporations, workers and consumers.

The tariffs, meant to boost both national security and heavy industry, impose a 25 percent surcharge on foreign steel and a 10 percent surcharge on foreign aluminum. Temporarily exempted are close trading partners Canada and Mexico, who together supply nearly one-quarter of steel imported into the U.S. Canada is the biggest supplier of both imported steel and imported aluminum to the U.S.

South Korea, together with Brazil and Russia, supply another quarter of U.S. steel imports. China, often cited by Trump and others for “dumping” cheap steel here, supplies about 2 percent.

The U.S., at one time the world leader in production of both steel and aluminum,now imports about one-third of the steel it uses and 90 percent of the primary aluminum. But most experts say that employment declines in metals production in recent decades are due to technology, not cheap foreign imports.

“The real impact in jobs in the steel industry is due to the changes in productivity, you know, the way steel is made, the man-hours it takes to make a ton of steel, have improved dramatically over the past 10, 15, 20 years,” said John Packard, publisher of the trade journal Steel Market Update.

Experts and industry analysts agree the new tariffs will raise prices on steel and aluminum. And the last time the U.S. imposed big tariffs on steel, in 2002, it didn’t work out so well.

But Packard is among those saying these new tariffs should help American steel and aluminum producers. Indeed, earlier this week, U.S. Steel announced that in anticipation of increased demand, it plans to re-open a blast furnace in Granite City, Ill.

“I think the benefit [of the tariffs] is significant,” he said. “Canada and Mexico, that trade has been seamless with the U.S. for quite some time. Other trading partners, like Vietnam or China or Korea, how they come into the marketplace could be disruptive. [The tariffs] should perhaps blunt some of that disruption for a stronger steel industry.”

Some worry that the tariffs could spark trade wars, with other nations imposing duties on U.S. goods, from cars and motorcycles to bourbon and blue jeans. But other unwanted consequences are possible. For example, the tariffs could hurt industries that use steel and aluminum to make other products.

Josh Spoores, a locally based steel-market analyst with theCRU Group, a global firm, said that low prices don't explain many imports. For instance, Canadian steel costs the same as U.S. steel; U.S. buyers get 16 percent of their imported steel from our northern neighbor mostly because the two countries' economies--and supply chains--are so integrated that it's just easier. (Also notable:Canada imports about half of the steel it uses -- and it gets most of that from the U.S., accounting for half of U.S. steel exports.)

Spoores said higher prices will send companies looking for cheaper substitutes: wooden studs in construction, instead of steel, for instance, or cardboard food packaging instead of metal cans. Price increases could also push steel-consuming industries to leave the U.S. for locations where steel costs less.

“These new tariffs could result in the loss of 200,000 jobs overall,” said Spoores. “That’s essentially the fear right now, is that these new tariffs will likely lead to offshoring of any sort of steel-intensive goods."

In his televised address on Thursday, Trump said the tariffs could take effect in as few as 15 days. But any impacts on prices will take longer to be felt. Packard noted that many industries that use steel buy it through contracts that are indexed to quarterly prices, so the effect might not appear for months. In industries like construction, which don’t employ such contracts, the impact could be felt sooner, he said.

Bill is a long-time Pittsburgh-based journalist specializing in the arts and the environment. Previous to working at WESA, he spent 21 years at the weekly Pittsburgh City Paper, the last 14 as Arts & Entertainment editor. He is a graduate of Northwestern University's Medill School of Journalism and in 30-plus years as a journalist has freelanced for publications including In Pittsburgh, The Nation, E: The Environmental Magazine, American Theatre, and the Pittsburgh Post-Gazette. Bill has earned numerous Golden Quill awards from the Press Club of Western Pennsylvania. He lives in the neighborhood of Manchester, and he once milked a goat. Email: bodriscoll@wesa.fm