Continued tariffs will sustain ongoing growth of US steel sector: AISI
The sustained enforcement of steel tariffs under President Joe Biden is crucial for the US steel industry’s growth as it maintains ongoing reinvestment in domestic capacity, American Iron and Steel Institute CEO Kevin Dempsey said Feb. 2.
“As the US economy grows, if we don’t have the [Section 232 steel tariff] program in place, we are going to see a new surge in imports that is going to be devastating at a point when the industry is making significant new investments in new capacity and important improvements,” Dempsey told attendees during a virtual presentation for the Tampa Steel Conference.
Dempsey said the 25% steel tariffs imposed in 2018 by former President Donald Trump have been instrumental in lowering import surges over the last decade and boosting the domestic steel industry’s capacity utilization.
“Those tariffs really allowed us to recover from a recurring set of steel import surges that had damaged the industry and really weakened our situation,” he said. “As a result of the tariffs, we saw capacity utilization in the US rise from a 74% average in 2017 up to about nearly 90% in 2019.”
The negative impacts of the coronavirus pandemic in 2020 caused steel capacity utilization to fall to about 51% in May of that year, but utilization has since returned to about 77% in January, Dempsey added.
However, as the global economy recovers from the pandemic, steel overcapacity in foreign countries threatens to fuel a renewed surge of steel shipments to the US if tariffs are removed.
“Past experience shows that when we have faced global demand shocks like the Asian financial crisis in the late 1990s, that has been followed by surges of imports into the US,” Dempsey said, adding that a similar trend occurred following the financial crisis of 2008-09. “They shipped to the US seeking to sell unsold steel and that led to the surges in the late 1990s.”
Temporary tariff suspension may aid downstream sector
A stop to the US steel tariffs, even if temporary, may be necessary in supporting downstream manufacturers and steel consumers as they struggle to recover from the pandemic and access affordable steel supply, international trade lawyer Lewis Leibowitz said.
“People are hurting, and you need to relive their pain,” Leibowitz said during the Tampa trade panel. “A temporary suspension of tariffs for the duration of this emergency would be very prudent, and other countries have worked on that – they respect their downstream industries probably more than our politicians do.”
Leibowitz said the Section 232 steel tariffs were originally imposed for national security concerns, rather than issues involving fair trade or economics. He added that the US has “lost sight of what the goals are on these issues” as it fails to revisit its tariff policy in response to new economic developments.
“We have a manifestation where prices double in a matter of months, and we have the issue of how to get the steel we need to keep America going,” he said.
“To not have a response and to say we are going to wait until there is no more overcapacity, and we are going to wait until everyone behaves as environmentally sensitively as the advanced countries, that’s a prescription for not doing anything.”
Steel Manufacturers Association President Philip Bell said the US has indeed taken steps to adapt its tariff policy by reviewing the tariff exclusion request process to potentially include a general approved exclusions (GAE) list.
The GAE provision allows certain steel products to be imported tariff-free if they have not been subject to objections in the past.
However, Bell noted that the SMA opposes the GAE “because we think they have the unintended consequence of creating import surges and including products [for which] exclusions were actually denied previously.”
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