Maintaining steel prices makes no sense


To hear the steel industry lobbyists tell it, President Donald Trump’s 2018 decision to impose 25% tariffs on foreign steel is about the only thing keeping American steelmakers in business.

‘The domestic steel industry was in a state of crisis’ before the tariffs, according to a statement submitted by the Steel Manufacturers Association ahead of tomorrow’s U.S. International Trade Commission hearing focused on the economic consequences of these tariffs (and others) four years after they were imposed. “The industry was in free fall,” says a separate statement from Nucor, one of the largest American steelmakers.

But the data Nucor submitted with this statement appears to challenge some of these dramatic claims.

For example, here’s a graph showing the monthly capacity utilization of the US steel industry – a measure of the production capacity going on each month – with an additional red line indicating when the tariffs were imposed. See if you can find the “fall” that required costly government intervention:

Lobbyists from steel companies like Nucor and trade groups like the Steel Manufacturers Association are expected to testify at Thursday’s hearing alongside small businesses and other trade groups who have been harmed by the higher prices created by the tariffs imposed. by Trump and which Biden has maintained. These tariffs shielded the U.S. steel industry from some foreign competition, increasing profits and allowing marginal growth in capacity and employment.

These marginal gains were offset by huge increases in steel prices, increases that were passed on to steel-consuming industries and, ultimately, consumers.

Before the tariffs were imposed, a 40-by-60-foot steel building would have cost about $25,000, according to General Steel Corporation, which processes raw steel into finished products. Now that same structure would cost over $30,000.

Scott Buehrer, president of Indiana-based metal fabrication company B. Walter and Co., says his company has seen steel prices nearly triple since the tariffs were imposed.

“This places U.S. industrial users of steel in a difficult position to decide how much of the increased cost of steel to pass on to their customers,” Buehrer wrote in testimony submitted to the ITC ahead of the hearing tomorrow. “Transfer too much and risk losing business to foreign competitors who have access to steel at half the U.S. price. Transfer too little and your plant generates insufficient revenue to cover its costs, which does not is not a sustainable situation.”

“Any gains the steel industry has received from tariffs have been eclipsed by losses to downstream businesses,” summed up Stuart Speyer, president of Tennsco LLC, a Tennessee-based metals fabrication company, in testimony to the ITC.

Rather than addressing the realities created by tariffs, including higher prices that have rebounded through the economy and helped fuel inflation, the steel industry’s approach to examining the ‘ITC is all about denying that the problem even exists.

While critics of the tariffs have claimed that downstream industries and consumers bear higher costs, the Steel Manufacturers Association argues in its filing with the ITC, “the reality is that these measures have supported the recovery of the steel industry without any significant negative impact on consumers or inflation.”

The word “meaningful” does a lot of work there, given the stacks of anecdotal evidence — from companies like those owned by Buehrer and Speyer — and academic studies that have concluded the exact opposite. Indeed, in the very next sentence from the group’s testimony, the Steel Manufacturers Association admits that the tariffs caused steel prices to rise (the group argues that these increases were only temporary).

If you discount higher prices as a “significant” impact of tariffs – which exist only to force prices higher – then it’s easy to look at the past four years and conclude that US steelmakers have reaped the benefits of ‘a protectionist trade policy without any significant trade. But this is a patently misleading assessment of the past four years, one the ITC should not believe.


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