US President Joe Biden’s pledge to end trade wars with Europe after four years of transatlantic tensions under Donald Trump is met with stiff opposition from the US steel industry.
Steel mills in the United States have thrived over the past year as commodity prices skyrocketed and the industry consolidated. Another factor in their favor is the 25% tariff the Trump administration imposed on imported steel in 2018.
European officials want tariffs removed. Last week, the Biden administration said it hoped to reach an agreement with the EU on the issue by the end of the year, after Brussels said it would delay the escalation of human rights. retaliation of at least 50% on American products, including bourbon and Harley-Davidson motorcycles.
But satisfying Europe risks angering a politically powerful American steel industry with factories in states like Indiana, Ohio and Pennsylvania.
“Steel is a powerful word, it symbolizes American might and it is seen as a fundamentally American industry,” said Paul Sracic, professor of political science at Youngstown State University in Ohio. Removing tariffs will be “politically very difficult,” he said.
Europe’s retaliatory levies were a reaction to the so-called Section 232 tariffs the Trump administration introduced for national security reasons, which also included a 10% tariff on aluminum imports.
Although Brussels’ announcement last week signaled a potential easing, the US steel industry is already pressuring the president to keep the tariffs. Last week, industry organizations and steelworkers unions wrote to Biden saying the removal of tariffs “would jeopardize the viability of the US steel industry,” which they say is threatened by state-subsidized factories in China.
Steel markets have skyrocketed, with US prices higher than similar steel in Europe. Shares of US steelmakers such as Nucor, Cleveland-Cliffs, Steel Dynamics and US Steel more than doubled last year, according to S&P Global Market Intelligence.
U.S. steelmakers argue that the rally is part of a larger boom that is pushing up the prices of commodities such as lumber, semiconductors, and agricultural products, not Trump’s tariffs.
“We went from a situation where there was virtually no demand, and no inventory being built, to a situation where the economy actually weathered the pandemic better than expected, and there was a lot of pent-up demand not just for steel, but for many other products, ”said Phil Bell of the US Steel Manufacturers Association.
Steel users, however, want Trump’s tariffs removed. The American Chamber of Commerce, one of Washington’s most powerful trading groups, said soaring steel prices present serious challenges to American manufacturers who make things out of steel.
Last week, around 300 small American companies wrote to Biden asking for the duties to be removed, saying that for some products, American companies were paying 40% more for similar steel compared to their European counterparts and that the lead times for delivery ranged from six to 20 weeks. .
“Without tariff termination, this situation will worsen if Washington goes ahead with an infrastructure bill to invest in America, as these projects will put more pressure on domestic supplies of steel and aluminum. , causing delays in construction and risking manufacturing jobs, ”the group wrote.
The steel industry figures supporting the tariffs remain open to the idea that Biden could roll them back in exchange for further action from Europe against China’s steel overcapacity, coupled with a new stimulus for the national steel industry in the form of the proposed infrastructure package.
Roy Houseman, legislative director of the United Steelworkers union, which represents more than 850,000 workers in the steel and other industries and supports tariffs, acknowledged that Biden’s $ 1.7 billion infrastructure proposal could boost the domestic demand for steel and support the industry.
“It all depends on the size of the package and how it drives demand,” Houseman said of infrastructure legislation, the current shape and scale of which faces stiff opposition from Republican lawmakers in Congress. .
Biden has also taken steps to strengthen existing U.S. purchasing laws, which require U.S. government agencies to source as much as possible domestically, providing another potential benefit to the U.S. steel industry.
Clete Willems, a former trade official in the Trump administration, said the Biden administration could work with Europe to strengthen oversight of the transshipment, through which Chinese steel reaches the United States via Europe and avoids import restrictions.
Instead of the Section 232 tariffs, the United States could also place quotas on steel imports and threaten to reapply tariffs in the event of a surge in metal entering the United States, Willems suggested. .
Scott Paul, chairman of the Alliance for American Manufacturing, which is backed by industry and the metalworkers’ union, said whatever solution the EU and the US find, it will be necessary to continue to defend the US industry against overcapacity in China.
“I can’t imagine a scenario in which this administration would pull the rug out from under the steel industry in the United States,” Paul said.
Sracic, of Youngstown State University, said the math was based more on politics than economics and that appearing to snub American steel jobs would lose voters. “That is why the administration has to be careful even when talking about removing tariffs,” he said.
The FT has revamped Trade Secrets, its go-to daily briefing on the changing face of international trade and globalization.
register here to understand which countries, companies and technologies are shaping the new global economy.