As U.S. Considers Revisiting Steel Tariffs Against The EU, Local Manufacturers Remain Divided On The Issue
While Trump-era steel tariffs remain intact, the Biden administration reaffirmed this week that it could negotiate with the European Union over the import tax — a possibility that elicits mixed reactions from local manufacturers.
Former President Trump imposed the levies in 2018 to help domestic steelmakers such as U.S. Steel. But the Pittsburgh-based producer said it welcomes the talks with the EU, in hopes that the 27-country bloc will agree to crack down on a global steel glut.
“It is appropriate that the Section 232 [tariffs remain] unchanged during the EU dialogue,” the company said in a statement. “We appreciate the Biden Administration’s focus on resolving global steel overcapacity as a significant threat to American steelmaking, steel jobs and national security.”
Trump authorized the tariffs under Section 232 of the Trade Expansion Act, citing national security concerns. While that rationale upset European allies, U.S. Commerce Secretary Gina Raimondo praised the tariffs earlier this year for helping to “save American jobs.”
During President Biden’s visit to Brussels this week, the U.S. and European Union pledged to work together to resolve tensions caused by the tariffs. To facilitate negotiations, the EU suspended for six months a series of retaliatory tariffs on American goods. European officials hope the talks will conclude by the end of year.
‘At some point, something has to give’
But an easing of tariffs against EU nations would not help Mercer County-based steel coil maker NLMK USA, and could even hurt it.
NLMK CEO Bob Miller said that domestic and European producers don’t supply the type of steel his company needs, and that lifting the tariffs would help European firms make the same finished steel goods as NLMK.
“That would compete with our product,” Miller said. “So it's real simple — European steel comes in, and there's usually a couple of traders … sitting in offices, selling [it] to the people that consume steel. But no U.S. workers do anything with that.”
NLMK imports steel slabs from Russia and Brazil to make steel coil that’s found in household appliances. Miller said suppliers pass the 25% steel levies on to his firm, limiting the amount of raw material the company can buy, and sometimes forcing worker layoffs.
“It definitely has increased the cost, and it also has limited our ability to produce and contribute as a supplier,” Miller said of the import tax. “So we have not been able to run since 2018 at the maximum levels just because we can't get enough raw material to run our facilities.”
At full capacity, the Russian-owned firm employs 1,200 people across three U.S. plants, Miller said. In November, the U.S. Commerce Department agreed to refund NLMK for “a significant portion” of the tariffs it had previously paid. The refund was part of a settlement over a lawsuit challenging the department’s denial of 86 requests NLMK had made for exemptions from the tariffs.
Mark Beichner, chief operating officer at Canonsburg-based steel parts maker AccuTrex, opposes the tariffs. In May, AccuTrex joined 300 U.S. manufacturers in a letter that urged Biden to lift the American tariffs on steel and aluminum.
Unlike Miller, however, Beichner thinks that a relaxation in levies against the EU could help his company, whose customers represent industries ranging from aerospace to renewable energy.
Costs at AccuTrex have skyrocketed amid a pandemic-induced steel shortage, forcing the company to raise prices and delay orders by months. Beichner said his company typically uses domestic suppliers, but when a U.S. steelmaker told him it could not deliver 50,000 pounds of material until November or December, he searched for new options in Italy, a member of the EU.
“We're really for anything that helps normalize the supply chain here locally. And if it's a matter of removing the tariffs, then so be it,” Beichner said.
Tariff supporters argue that critics should not blame the levies for supply-chain disruptions that COVID-19 has caused worldwide. But Beichner countered, “I’d invite them to come in and talk to the customers who aren't real happy that our prices have spiked 70 to 75 percent, and also talk to them about not being able to get our customers product as well.
“If you don't have the raw material and the price spikes are going through the roof … at some point something has to give.”
Tariffs: Job creator or killer?
Despite Beichner’s frustration over the steel shortage, the chief worry for the tariff’s proponents is global overproduction of the material.
Kevin Dempsey, who leads the American Iron and Steel Institute, noted that countries across the world, including in Europe, use subsidies and tax breaks to prop up domestic suppliers, resulting in excessive capacity that drives down global steel prices. China is a particular concern.
“The underlying problem is that we don't have strong enough international rules to prevent governments from subsidizing the building and the maintaining of uneconomic steel capacity,” Dempsey said.
But U.S. tariffs, he added, help to “to prevent [the resulting] surges in imports, to give the U.S. industry a chance to recover, to stabilize, to reinvest and expand and to regain its footing.”
In March, the pro-union Economic Policy Institute reported that, since Trump ordered the tariffs in 2018, American steelmakers had vowed to invest nearly $16 billion in upgraded facilities that promise to reduce carbon emissions. EPI estimates those projects will create 3,200 new jobs in steel production.
“The 232 tariffs are working,” said Philip Bell, president of the Steel Manufacturers Association, the country’s largest trade group for steelmakers. “And that has a very important effect on the domestic steel industry in the United States: What it does is it modernizes American steel making; it creates more efficient, better performing mills that also produce steel in a more sustainable way. …. This is long overdue.”
But Richard Chriss, president of the American Metals Supply Chain Institute, countered that tariffs have held back investments for the manufacturers his organization represents.
On net, he said, the tariffs had hurt American jobs: Data shows that U.S. iron and steel mills experienced modest employment gains in the year-and-a-half after Trump’s tariffs took effect; but the Federal Reserve estimates that price hikes resulting from the tariffs led to the loss of about 75,000 U.S. manufacturing jobs.
In addition, Chriss noted that excess capacity remains a problem in the steel market.
“In fact, China's capacity and steel production hasn't waned whatsoever during the time that these tariffs have been in effect,” he said. “So [the tariffs are] not achieving their stated objective. They're creating much difficulty and consternation for our manufacturers and our allies overseas. And they're really harming U.S. consumers.”