Even early supporters of Section 232 - such as the United Steelworkers union's international president Leo Gerard and members of President Donald Trump’s Republican Party - warned that the trade measure could backfire on the rest of the US economy. And some questioned why the United States was turning its trade focus on Canada, a close ally, instead of China, whose trade practices Trump campaigned against.
Steel prices have held largely flat while the market assesses the impact of the unexpectedly severe measures against traditional US allies
and trading partners. The 25% tariff on steel imports went into effect on Friday June 1.
American Metal Market's hot-rolled coil index
stands at $44.03 per hundredweight ($880.60 per ton), nearly unchanged from $44.05 per cwt ($881 per ton) previously.
CME Group steel futures
indicate that market participants expect steel prices to move higher in the short term, then drop for the balance of the year and into 2019. July forward contracts were seen at $46.05 per cwt on June 1, but those for December fell some 9.3% to $42.60 per cwt.
Trump threatens Beijing, hits Ottawa
“These tariffs are hitting the wrong target. When it comes to unfairly traded steel and aluminum, Mexico, Canada and Europe are not the problem - China is," Representative Kevin Brady (Republican, Texas), who serves as chairman of the House Ways and Means Committee, said in a statement
Brady also blasted the Section 232 product exclusion process, which he said “just isn’t working.”
Thousands of Section 232 product requests have been filed, and there are concerns that the US Department of Commerce - now engaged in trade disputes around the world - does not have sufficient staff to process them.
At least one European mill is already bracing for the 232 tariffs. Austrian steelmaker Voestalpine, which has 49 locations in the US, on Friday warned that the tariffs could impact 3% of its revenue.
The company decried the 232 exclusion process
as well. “As far as we know, to date the US administration has not processed any of these applications - either from Voestalpine, our partners or [our] customers,” the mill wrote.
Voestalpine chief executive officer Wolfgang Eder also warned that the Trump administration was taking the world into uncharted territory with the 232 trade action. "It is difficult to assess the long-term effect on the global economic structure and free trade. As a company, we have prepared for all eventualities," he said.
There will be no winners from a trade war, and small businesses in the US might be the biggest losers, according to American Institute for International Steel president Richard Chriss.
“Make no mistake: Restricting the raw material supply in the US and imposing tariffs on imports from our closest trading partners places American manufacturers directly in harm’s way,” Chriss said in a statement
. “The pain will by no means be limited to the manufacturing sector; a slew of other US-made products will soon be penalized with retaliatory tariffs by our major export trading partners.”
Canada drops the gloves
Mexico, Canada and the EU have already threatened to retaliate against a host of US exports - including not only steel but also agriculture products such as orange juice and steel-intensive goods such as refrigerators.
As a result of the tariffs, a trade war could be brewing with Canada - the United States’ largest trading partner and the largest market for US exports, US Census Bureau figures indicate
Effective July 1, the Canadian government will place a 25% tariff on US steel exports, as well as a 10% tariff on other US goods as diverse as coffee, plywood and motorboats. The tariffs will remain in place until the US ends its penalties on shipments from Canada, according to a notice from Canada’s Department of Finance
Canada is the top destination for US steel exports. The US exported 2.27 million tonnes of steel products in the first quarter of 2018, according to Commerce figures
. More than half of that total, 1.17 million tonnes, went to Canada. Shipments to Mexico, the United States’ other North American Free Trade Agreement partner, accounted for another 829,580 tonnes - or 36.5% of the first-quarter total.
Section 232 will therefore hurt steelmakers and consumers on both sides of the border, Algoma president and chief executive officer Kalyan Ghosh said in a statement emailed to American Metal Market.
“There is no question these tariffs will have a damaging impact on Algoma, as well as on our US customers with whom we have longstanding relationships, and on many within our supply chain - be they raw material suppliers or providers of transportation services,” Ghosh said.
Algoma hopes the tariffs will prove short-lived so that the cost to the North American economy is not too great.
A Canadian flat-rolled steelmaker, Algoma is an important supplier of sheet and plate to markets in the US Midwest and the Great Lakes basin.
The USW's Gerard, who had been a vocal proponent of the 232 investigation
, also blasted the tariffs.
“Canada is not the problem. The decision to remove Canada’s exemption is unacceptable and calls into serious question the design and direction of the US administration’s trade policy,” Gerard, who began his metals career at a nickel smelter in Ontario, said in a statement
Will the base hold?
Trump supporters within the US steel industry remain in the president’s corner despite mounting concerns about the potential fallout from an accelerating global trade fight.
Dan DiMicco, chairman of the Coalition for a Prosperous America, cheered the Trump administration for its efforts
to end exemptions for Canada, Mexico and the EU.
He singled out for praise Commerce Secretary Wilbur Ross, a former ArcelorMittal director; US Trade Representative Robert Lighthizer, a former trade attorney for U.S. Steel; and Peter Navarro, director of the White House Trade Council, who has chastised Treasury Secretary Steve Mnuchin for his more moderate stance on trade issues. DiMicco previously served as CEO for Nucor and is now chairman emeritus of the company, which is the United States' largest steelmaker.
“They have adeptly navigated the path of protecting US national security interests as they engaged in negotiations with other countries,” DiMicco said in a statement.
The Steel Manufacturers Association (SMA), which represents electric-arc furnace steelmakers such as Nucor, also cheered the move.
“We support… President Trump’s objectives under Section 232 to remove the threat that steel import surges pose to our national security and [to] restore the domestic steel industry to health,” SMA president Philip Bell said in a statement.
The Alliance for American Manufacturing (AAM) also celebrated the tariffs, but urged the president to turn his attention to infrastructure spending.
“These tariffs aren’t the job killers they were warned to be, but... tariffs alone won’t sustain a factory resurgence. We need infrastructure investment,” AAM president Scott Paul said in a statement on Friday.
The president campaigned on a promise to spend $1 trillion on US infrastructure, but made cutting taxes a priority in his first year in office. The White House released a planned infrastructure initiative in mid-February
“Washington spent trillions building up foreign countries while allowing OUR OWN infrastructure to fall into a state of total disrepair,” Trump said in a tweet on March 29
. “No more! It's time to REBUILD, and we will do it with American WORKERS, American GRIT, and American PRIDE!”