- The US steel industry has got several major reprieves in the form of tariffs over the last six years. After Cleveland-Cliffs complained about higher imports on GOES (grain-oriented electrical steel) products, the Department of Commerce self-initiated a probe.
- The probe will be carried out under Section 232 of the Trade Expansion Act of 1962. In 2018, President Trump slapped tariffs on US steel and aluminum imports under the same section.
US steel industry
Over the last six years, the US steel industry has won many reprieves in the form of tariffs. In 2014, the administration imposed tariffs on imports of oil country tubular goods from South Korea. In 2016, domestic mills won a major battle. The US slapped punitive duties on flat-rolled steel products from major exporters including South Korea, China, and Japan. Later, the duties were extended to Vietnam. China was found to be transshipping flat-rolled steel from Vietnam. Turkish rebar was slapped with tariffs in 2017.
Notably, the US slapped tariffs on major exporters of those product categories. Meanwhile, imports continued to arrive from new locations.
Trump’s Section 232 tariffs
In 2018, President Trump imposed a 25% tariff on US steel imports and a 10% tariff on US aluminum imports after the Department of Commerce’s Section 232 investigation. The blanket tariff intended to provide sustainable relief to domestic manufacturers.
Last year, the US slapped tariffs on structural steel imports from China and Mexico. Earlier this year, the Section 232 tariffs extended to some downstream products.
Cleveland Cliffs wants more tariffs
In March, Cleveland-Cliffs (NYSE:CLF) warned about layoffs if there aren’t tariffs on imported downstream GOES products. AK Steel is the only GOES producer in North America. Now, the Department of Commerce has self-initiated a probe into imports of GOES products. Cleveland-Cliffs has welcomed the development.
As I have noted previously, GOES is an important and strategic product. After tariffs on upstream steel products, downstream imports will likely increase. However, we have to draw a line. Tariffs can’t be an exercise in perpetuity.
Layoffs in the US steel industry
Looking back, while the US slapped tariffs on imports on several key product categories including a blanket Section 232 tariff, the US steel industry’s fortunes haven’t really revived. Even if we consider this year’s layoffs after a black swan event, the US steel industry was laying off workers last year as well.
The case isn’t any different for the aluminum industry. Falling global aluminum prices have more than offset President Trump’s 10% tariff on US aluminum imports. Incidentally, in 2002, President Bush also tried tariffs. However, he lifted them within two years. Could Trump’s tariffs go the same way?