There is a battle being waged, and it is not against any “axis of evil.” In this battle, steel is the source of adversity, and the “battle” could set off a global trade war between the U.S. and the European Union and other countries such as China and Japan.
This battle is a result of President Bush’s March 5 decision to impose a 30% tariff on steel imports over the next three years in order to give the nation’s steel industry time to recover from the financial crisis it found itself in after the Asian financial crisis of 1998. That crisis prompted a flood of cheap steel into the U.S., which sent steel prices plummeting to 20-year lows and resulted in the bankruptcy of about 31 steel mills throughout the country.
The tariffs were 10% lower than what steelmakers had demanded, and exclude members of the North American Free Trade Agreement, including Canada, Mexico and developing nations, but that has not lessened the burden that is now on other international steelmakers. In fact, various countries affected by the tariffs are already threatening to impose retaliatory tariffs on U.S. products as early as July.
Since the Bush administration announced it would impose tariffs on imported steel products, 61 products have been exempted from the tariffs. On June 7, the Bush administration announced its decision to exempt 61 products, about 1% of the 13 million tons of steel imported annually, from the tariffs. The 61 products covered 136,000 metric tons of steel imports last year, and included certain types of plate, hot-rolled products, cold-rolled products, stainless steel products and welded pipe and tubes. According to the Commerce Department, the products were excluded from the tariffs because U.S. producers do not make them in sufficient quantities to meet American demand. A July 3 deadline has been set for decisions on an initial group of another 470 exemption requests.
For some, however, these exemptions simply are not enough. Some believe action needs to be taken to reverse Bush’s decision to impose the 30% tariff on steel imports.
Larry Cox, president and CEO of the Jackson-based Steel Service Corp., said the tariffs have a good and bad side.
“I’m not a protectionist-type person, but if we’re going to maintain the steel industry in America for wartime or whatever, it was obvious something needed to be done,” Cox said. But, he said, “When tariffs were applied it affected a tremendous array of different types of steel materials.”
For example, large tariffs are now placed on steel beams from Japan and Korea, and those items cannot be found domestically. Cox is getting the same steel beams he was getting before, but now he is importing them from Canada instead of Japan and Korea. Canadians face no tariffs when they import steel beams, and because Bush’s tariffs exclude members of the NAFTA, including Canada and Mexico and developing nations, Canada can turn around and export the Korean or Japanese steel beams they have imported to American job sites at much lower costs than Cox can.
“So did it really help the steel mills?” Cox asked.
Cox said the tariffs will help, but consumers will pay the price.
“What you have to remember is that it is a world economy,” Cox said. “You have to compete, but our wages aren’t $1 an hour. From that standpoint you’d think you need some kind of protection.”
In the steel fabrication industry, Cox does not see relief coming anytime soon.
“The Chinese, Koreans, Japanese and third-world companies are bringing in fabricated steel for large products,” Cox acknowledged. “But our biggest competitor today is Canada, and with the imbalance of the dollar, I don’t see any way that (the tariff) helps.”
Other companies such as Northrop Grumman Ship Systems and Nissan North America Inc. have not felt much of an effect as a result of the steel tariff.
According to a statement released June 14 by Northrop Grumman, to this point, the company has not felt an impact from steel tariffs.
“The company uses all U.S.-produced steel for its U.S. Navy shipbuilding contracts; and only a limited amount of foreign steel for its POLAR tanker program,” Northrop Grumman’s statement read. “The company is closely monitoring the situation, however, in case U.S. mills try to increase prices due to the ‘supply and demand’ effects the tariff changes may have.”
Tom Groom, director of human resources at Nissan North America Inc.-Smyrna (Tenn.), said the vast majority of Nissan’s steel is domestic as well, so the tariffs on imported steel have a very minimal effect on Nissan.
Liz Cleveland, manager of the International Trade Office for the Mississippi Development Authority, said the effect of steel tariffs on Mississippi exporters is two-fold.
“Those companies that heavily utilize steel in their manufacturing processes have seen the price of steel increase since the tariff was imposed, therefore making their manufacturing costs rise,” Cleveland said. “This cost has to be absorbed by the company and passed along to the consumer, making our goods less price competitive in world markets.”
The second, and possibly the more profound effect the steel tariff has had on Mississippi, Cleveland said, is in the poultry industry.
“Almost immediately after the steel tariff was imposed, outright bans on poultry imports and some meat imports from the entire U.S. were initiated, citing rare and random occurrences of low-pathogenic avian influenza that had been detected in Virginia, North Carolina, Pennsylvania, West Virginia, Maine, California and Texas poultry,” Cleveland said.
Cleveland said it is not unusual for non-tariff barriers to be imposed in retaliation to a country’s efforts to protect its local industry. In this instance, these countries imposed bans to retaliate on behalf of their local steel and poultry industries, and, she continued, “They were also sending a message to the U.S. regarding their opinions of the tariff imposition.”
Mike McAlpin, president of the Mississippi Poultry Association, said while the timeliness of both announcements could certainly lead one to believe that there might be some connection between the ban of imported poultry and the steel tariffs, there is no substantiating data to that effect.
McAlpin added, “It’s my understanding that the tariff really doesn’t hurt the Russians as much as it does some of the other countries we import steel from.”
Lex Taylor, president of Taylor Machine Works Inc. in Louisville, said he has mixed emotions about the tariff. Taylor is a manufacturer of heavy industrial lift trucks, but one of Taylor’s companies, Tempco, is a service center for high-strength plate steel.
“From the manufacturer’s side we can see steel prices have risen as a result of the tariff,” Taylor said. “As soon as tariffs went into effect, steel prices rose as a result of the tariff.”
But for Taylor, the tariffs have been a double-edged sword.
“Prices are rising accordingly from vendor sources, but Taylor as a lift truck manufacturer has a big market in the steel industry,” Taylor explained. “We’re seeing a ramping up of business to our steel customers. It’s an interesting dilemma. Prices rise and that’s detrimental to us but that same supplier is our customer, too. We talk out both sides of our mouth when we talk about these tariffs.”
Taylor said it is a good thing that Bush imposed tariffs on imported steel.
“We are a free market economy,” Taylor said. “That’s what we believe in. So it sort of goes against the grain to have tariffs. But something has to give. We can’t continue to lose jobs based on our competitors or consumers in world markets getting
ected because of the exchange rate differential.
“I think at the end of the day there will probably be a slight increase in pricing to the consumer, but the consumer is only a consumer if they have a job and are able to purch