Tariffs Set By Donald Trump Do Not Reactivate The US Steel Industry

Washington – Donald Trump's decision to set tariffs on steel imports generated a mixture of enthusiasm and unease. The objective was to raise steel prices, with the consequent damages that could be caused to the factories that depend on it.

But at least it should benefit the US steel companies and their employees. In any case, that was the theory.

Trump's 25% tariffs, however, did little for the people he was supposed to help. Steel prices and corporate profits collapsed. Investors are selling their shares.

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The sector added just 1,800 jobs since February 2018, the month in which tariffs entered into force. It is an insignificant figure in a labor market of 152 million, during a period in which US companies incorporated a total of 4 million workers. Steelmakers employ 10,000 people less than five years ago.

"Despite these high tariffs, the industry has not been able to take advantage," said Christine McDaniel of the Mercatus Center, a study group at George Mason University.

Trump's commitment to rejuvenate the steel industry helped him get votes in the 2016 elections in states like Ohio, Pennsylvania and Wisconsin. By not fulfilling that promise, it remains to be seen what impact that will have in 2020. The electorate will have to choose between turning its back on Trump or at least recognizing that he tried to fight foreign steel mills.

Several factors lowered steel prices, from lower demand, motivated by a weak world economy, to increased production due to tariffs.

Prices rose for a few months after Trump set his tariffs and reached $ 1,008 a ton of hot rolled sheets in July 2018, according to the SteelBenchmarker portal, which monitors steel prices. Since then, it plummeted to $ 557 a ton, less than when tariffs were imposed.

"Over time, prices went down, down and down," said Mark Lash, president of Unit 1066 of the United Steelworkers Union in Gary, Indiana, which represents about 1,400 workers at a US Steel plant in this zone.

Trump's campaign against the foreign steel industry was overshadowed by his trade war with China. But steel tariffs came earlier and demonstrated the president's willingness to set aside seven decades of free trade policies and aggressively combat imports.

By collecting taxes on imported steel, Trump is exposed to raising the costs of many American industries that use steel, tending relations with allies and testing how far he can go by imposing penalties unilaterally on business partners.

Trump was determined to revive heavy industries such as steel and protect them from what he considers unfair foreign competition.

The effort to protect the steel industry is somewhat strange, since the economic benefits are modest. The industry employs only 142,000 people. By way of comparison, the Home Depot chain of stores employs 400,000. And the new steel plants are very automated. They don't need as many employees as the steel industries of the past and job creation is limited.

Trump's team, however, decided it was worth fighting. For decades, steel plants offered well-paid jobs that allowed millions of workers to access the middle class.

One of them, Doug May, spent 43 years working at the US Steel plant in Granite City, Illinois, before retiring. Since the recession of a decade ago, the plant has been paralyzed and resumed activities at least twice. Despite the instability, Mauy says that the Granite City plant offered good jobs.

"You can raise a family," he said. "I was able to pay for the university of three children working there."

At first the workers in the sector welcomed the tariffs.

"When Trump made the announcement, US Steel said they would run one of the two ovens that were inactive," May said. "We were all very excited."

But the good times did not last.

The first signs of problems arose in the stock market. Steelworks' actions had peaked on Wall Street in February 2018, shortly before tariffs entered into force. Since then, the Arca Steel Index of the New York Stock Exchange has dropped 32%.

And tariffs did nothing to mitigate China's dominance, responsible for 54% of world steel production. The United States produces 5%.

What did not work?

The growth of the United States and worldwide has slowed down in part because Trump's tariffs raised costs and increased business uncertainty. Lower growth implies less demand for steel plants.

"Demand is relatively low right now," said Charles Bradford, an independent analyst.

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