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Trump Expands American Steel Requirement

Tuesday, July 23, 2019

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Earlier this month, President Donald J. Trump signed an order that would see the expansion of the use of American-made iron and steel in federal projects. The “Buy American” platform will push the domestic content threshold from 50% to 95%.

According to The Washington Post, the recent signing followed an executive order enacted in January, and arrives around a year after steel tariffs were first rolled out.

Steel Tariff History

In March 2018, Trump imposed tariffs to affect steel and aluminum imports from other countries across the globe. The assigned duties were 25% on steel products and 10% on aluminum.

Companies that felt they needed to use steel or aluminum from another country—because that particular product wasn’t made in the U.S., for example—had the opportunity to apply for an exemption.

By June, the U.S. allowed the tariffs to go into effect for Canada, Mexico and the European Union, after months of discussion of possible exemptions. The U.S. Department of Commerce also announced the first round of exemptions, while noting that it would be investigating whether some companies in the market were taking advantage of the duties and raising prices unduly.

PhonlamaiPhoto / Getty Images

In March 2018, Trump imposed tariffs to affect steel and aluminum imports from other countries across the globe. The assigned duties were 25% on steel products and 10% on aluminum.

As Trump continued work on updating the United States-Mexico-Canada Agreement, Steel Dynamics CEO Mark Millett went on the record to say he believed a quota system would replace the current tariffs that the steel and aluminum industry were subjected to.

However, some in the aluminum industry were reportedly against the quotas, in fear that they would raise prices on aluminum-dependent goods. In May, Trump announced that the U.S. would lift its steel and aluminum tariffs imposed on Canada and Mexico in exchange for a new monitoring and enforcement system that will prevent import surges into the U.S. As a part of the agreement, Mexico and Canada woud also lift its retaliatory tariffs on American products.

Buy American Plans

The first executive order, known as Buy American and Hire American, was signed on April 18, 2017, and the second, Strengthening Buy-American Preferences for Infrastructure Projects, was signed on Jan. 31 of this year. Though Trump’s tariffs did provide a short boost for both prices and manufacturing, the import taxes did not result in a boom in manufacturing jobs.

“Things came back down to earth this year because the demand pulled back and industrial economy has softened,” said steel industry analyst Phil Gibbs.

“Now you’ve got a year where spending in the energy sector is down, auto is down, nonresidential construction is down and durable-goods orders are falling. You do have real demand weakness in the U.S. industrial economy.”

Since the 25% tariffs on imported steel were implemented, U.S. Steel has shed around 70% of its market value, and production at two of its plants has also been halted. According to the Post, tariffs are also reportedly costing consumers and businesses more than $900,000 annually for every job that is created.

Employment in the primary metals industry, which includes iron, copper, aluminum and brass, as well as steel, has declined by 40% over the last two decades. Economists have also pointed out jobs in steel-using industries total more than those in steel production by 80 to 1. The tariffs have also hit the steel-using industries to a point where companies are forced to absorb costs or pass along cost to costumers.

According to CNBC, John Ferriola, chairman and CEO of U.S. steelmaker Nucor, recently said that he was "pleased" with the results of the tariffs.

“Last year, demand was very strong, and as a result people were afraid they wouldn’t be able to get the steel they needed when imports went down. The domestic industry, Nucor included, responded by making sure that we gave our customers what they needed to keep our customers happy,” Ferriola said.

Nucor recently reported weaker than initially forecasted profit for the second quarter.


Tagged categories: Aluminum; Government; NA; North America; President Trump; Program/Project Management; Stainless steel; Steel; Structural steel

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