Steel Industry Organizations Plea to Keep Tariffs
Earlier this month, a group of several domestic steel industry associations penned a letter to President Joe Biden, urging him to keep steel tariffs and quotas that were set in place by the Trump administration.
The letter was signed by the American Iron and Steel Institute, the United Steelworkers, the Steel Manufacturers Association, the Committee on Pipe and Imports, and the American Institute of Steel Construction.
The letter referenced the tariff and quota program that was established in 2018 as a means to allow the U.S. to “restart idled mills, rehire laid-off workers and begin investing tens of billions of dollars in new and upgraded plants.”
However, the letter notes, those plans suffered a significant setback because of the COVID-19 pandemic.
“As customers have restarted production, the steel industry has begun to recover, but we remain very vulnerable to new surges in imports. Last year, the OECD projected that steel overcapacity would grow to 700 million metric tons in 2020—eight times the total steel output of the United States last year,” the letter reads.
“China, Vietnam and Turkey, among others, continue to increase their steel production even as the pandemic has caused demand for steel to drop around the world. Others, such as Korea, Russia, Ukraine and Indonesia, continue to export large and increasing shares of their steel production to other markets.”
The organizations add that continuing the tariffs and quotes is “essential to ensuring the viability of the domestic steel industry in the face of this massive and growing excess steel capacity.”
In May, Biden had told USW that he would keep the tariffs in place until a global solution to the excess production could be negotiated. More recently, he again said that he would not make changes, pending consultations with U.S. allies.
Steel/Aluminum Tariff Background
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.
In May of the following year, Trump continued work on updating the USMCA, 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. That same month, Trump later 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 would also lift its retaliatory tariffs on American products.
In July, 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 aims to push the domestic content threshold from 50% to 95%.
By December 2019, officials from Canada, Mexico and the United States signed a deal once again. The United States-Mexico-Canada Agreement replaced the North American Free Trade Agreement, and both the U.S. United Steelworkers union and the AFL-CIO labor voiced their approval of the deal.
At the beginning of 2020, Trump announced an expansion of tariffs on foreign steel and aluminum, claiming that the existing tariffs were not as successful as he’d hoped in restoring American production.
While imports of steel and aluminum into the United States have declined since the tariffs were established in 2018, imports of products made with the same materials have had a significant increase, according to Trump.
The expansion covered products made of steel and aluminum, such as nails, tacks, staples, cables, certain types of wire, bumpers, and various car and tractor parts, among others.
In Trump’s order for the expansion, he noted that from June 2018 to May 2019, imports of items including steel nails and staples rose 33% and imported aluminum wire and cables were up 152% over the same period.
Under the new program, specific products made of aluminum will be subject to an additional 10% duty and certain steel products will be tacked with a 25% tariff. However, Argentina, Australia, Canada (at the time) and Mexico were exempt from the expanded aluminum tariffs. Those countries, along with Brazil and South Korea, are also exempt from the new steel tariffs.
And, in August, the U.S. announced that it was reinstating its 10% tariffs on raw aluminum imports from Canada.