Steel Tariffs May Cause Rethink of Domestic Manufacturing

Mar 9, 2018
Originally published on March 12, 2018 9:24 am

President Trump's decision to impose 25 percent tariff on foreign steel, and 10 percent on foreign aluminum was not a surprise for those who followed his campaign rhetoric. 

But Ohio State University economist Ned Hill was surprised by *how* the President announced the decision, without perhaps considering all of the repercussions. 

He says one of the benefits of free trade is forcing industries to become more competitive on the international market, which is ultimately what happened to the steel industry.

“The industry in a very painful way had to downsize and get productive to meet international competition, and it’s reached a new level of equilibrium as a result,” Hill said. “Most of your listeners aren’t going to believe the fact that the United States produces 75% of the steel that we consume today.”

Hill says he agrees with the President that communities have been left behind as the economy has shifted, and that an infrastructure bill requiring more domestic steel, may be the way to create a bounce.

More from the interview

on giving exemptions to Canada and Mexico:

“Empirically it lessens the severity.  Canada is our largest foreign steel supplier, Mexico is down around fifth place.  But the important thing is it would minimize the disruption in the supply chain to both the North American automobile and appliance industries.”

on Arcelor Mittal in Cleveland:

“Since the Arcelor Mittal plant makes finish-grade, automotive steel, it will not cause any disruption with their customers, but it also means some of their Canadian competitors for finish-grade steel will still be able to compete with them on equal price footing.”

on considerations for making products that need steel:

“About six weeks or so ago the chairman of Toyota was down in Georgetown, KY, challenging the Toyota associated to get the price down on the Camry, because right now it’s cheaper to produce the Camry in Japan and ship it to the United States than produce it in Georgetown.  Honda and Toyota, both of which have important supply chain presence in the state of Ohio, are going to have to consider where they’re going to make their automobiles. The same way in which Whirlpool, which just got a judgement against LG, their largest investment’s actually in Ohio in Clyde and in Marion, and this may wipe out their cost advantage.”

on impact on China:

“Steel will still come into the United States from China, it will just come in from China in the form of finished goods.  When you buy a bicycle that’s frame has been assembled in China, that bicycle is bringing in Chinese steel.  And they don’t even make the top 10 list, and the reason is the WTO process worked.  There have been so many judgements against China, that they are not bringing steel into the United States…there was very little understanding of how the economy works in this decision.”

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