Mercer County Steel Mill Blames Trump Tariffs For Recent Layoffs, With More To Come

Jul 16, 2019

A northwestern Pennsylvania steel mill laid off between 80 and 100 employees this month, a move the company blames on President Donald Trump’s increased tariffs on imported steel and aluminum.

“We’ve already cut operating schedules, we’ve taken our hot strip mill down for weeks at a time,” said Bob Miller, president and CEO of NLMK USA. He predicted more layoffs in the near future. “It’s going to happen again here real soon. In this environment … it’s going to keep happening.”

The Farrell, Pa. mill’s parent company is based in Russia, and has imported Russian steel slab and manufactured steel coil in Farrell for years. But it faced a crisis that began in March 2018, after the Trump administration announced 25 percent tariffs on imported steel. NLMK applied for 85 exclusion requests in attempts to seek relief from the increased import taxes. The U.S. Department of Commerce denied every request more than a year later, after a long delay that was extended by a partial government shutdown this past winter. NLMK paid $160 million in tariffs in 2018.

“[The tariff policy] has done nothing but increase our raw material cost,” Miller said. “I believe the 232 tariff decision, in effect, stole $160 million from this business. We struggle hard to make margin in our business, so that wipes out, over the years, lots of ability to make a profit.”

The layoff announcement brought criticism of the Trump Administration from Republican U.S. Rep Mike Kelly, typically a staunch Trump supporter whose district includes Farrell.

“Though I agree with the administration’s approach toward leveling the playing field in steel production and punishing China for unfair trade practices, sometimes there are unintended consequences,” said Kelly in a statement.

“I advocated the company’s requests for relief directly to the President and high-level commerce officials because I believe they make a good case for exclusion. So far, the administration does not agree.”

The Commerce Department's decision cannot be appealed. NLMK would have to resubmit its requests for a waiver, which would start the process all over again.

In a letter to Republican U.S. Sen. Pat Toomey, who has long been critical of the administration’s trade policy, U.S. Secretary of Commerce Wilbur Ross said the exemptions were denied for two reasons: an adequate steel quantity is available domestically, and NLMK didn’t use proper tariff classifications in its requests.

Assessing the quantity and quality of domestic steel availability is a key factor the Department of Commerce uses to evaluate whether to waive tariffs. After a company like NLMK applies for tax exemptions on imported steel, domestic producers have 30 days to object by arguing they can provide the material domestically. If there is a domestic supply available, the request is denied.

But historically, Miller said, rival domestic producers have not made the steel slabs NLMK needs available.

“I mean, why would one of our competitors who manufactures steel slabs ... want to sell us a slab at a competitive price that allows us to go out and compete directly against them?” Miller asked.  

A report from the Mercatus Center at George Mason University noted that less than 1 percent of requests for tariff exemptions are approved when domestic companies object. 

The report also said that when raising their objections, domestic steel companies claim they can produce more steel than they have capacity for, “which calls into question their ability to meet the demand.”

The Farrell mill, which was once Sharon Steel, has been through financial distress before, filing for bankruptcy in the 1990s and going dark until NLMK restarted production.

“[NLMK is] really part of the success of the industry here,” Miller said. “We put workers back to work years ago. These workers work lots of hours, and work hard and are really good at what they do, and have turned this business, which was very shaky, into something we’re very proud of ... so it’s very sad.”