Trump’s steel tariffs
It’s been more than 15 months since President Trump announced a 25% tariff on US steel imports and a 10% tariff on aluminum imports. The tariffs came into effect towards the end of March 2018, and have been a key bone of contention between the United States and its trading partners. Several countries including Canada and Mexico retaliated against the tariffs. Some other countries like Japan and India played it relatively safe by complaining about the tariffs to the WTO. However, after delaying tariffs for almost a year, India has now decided to impose tariffs on some US goods including apples and walnuts.
US steel companies
The tariffs brought smiles to beleaguered US steel companies, who for years have been asking successive administrations for a level playing field. Steel companies like U.S. Steel (X), AK Steel (AKS), and Nucor (NUE) allege that steel companies elsewhere get subsidies from their governments, which makes it harder for them to compete with imported steel products from a pricing standpoint. There definitely was merit in steel companies’ allegation, as steel companies in China are known to enjoy government patronage. However, China’s support for its industrial sector is not limited to steel alone.
Have tariffs failed?
So, the question 15 months down the line is whether or not President Trump’s steel tariffs served their purpose. Steel companies’ price action suggests that the tariffs have failed. After all, last month both U.S. Steel and AK Steel fell to multiyear lows. Furthermore, all the leading US-based steel companies are trading below their March 2018 price levels when the tariffs were mooted.