Jun 13, 2017
Under a lot of pressure to do more to protect the American steel industry, the U.S. Commerce Department started imposing high tariffs on some imported steel products early last year. Now some in the American steel industry are pushing for even more tariffs. But not everyone agrees that imposing these types of penalties on importers is good for America. In fact, some believe the opposite is true.
The Basic Argument Against Higher Trade Tariffs on Imported Steel
The primary argument against the trade tariffs is that it will cause steel prices to go up. An article in the Wall Street Journal on May 31 said that while the tariffs were the equivalent of “throwing a lifeline to beleaguered American steel makers,” they were causing steel prices to inch up for those who use steel to fabricate and manufacture steel products.
Basically, the tariffs stifle trade with countries affected by the tariffs. This creates more competition among domestic steel producers, which in turn allows them to raise prices. And according to Fox News, domestic producers didn’t waste any time raising prices once the trade tariffs on steel began to be levied.
The problem is that in their rush to raise prices, domestic steel producers turned off some of their buyers. So rather than buy the higher priced domestic steel, manufacturers are instead beginning to turn to alternate countries which have not yet been affected by the tariffs to find more affordable steel imports.
Another issue with the steel tariffs which raises some concern is that many countries, especially in the EU, are threatening reprisals on the U.S. if they are targeted for steel tariffs by the U.S. like China has been.
The Basic Argument for the Tariffs on Imported Steel
Some in the U.S. steel industry blame a glut of Chinese steel for driving down global prices, resulting in less demand for American-produced steel. They say this has caused U.S. steel mills to either shut down or lay off workers.
Despite the pressure from the American steel industry, the Commerce Department officially targeted China with high tariffs for failing to cooperate in an investigation to determine whether the country uses unfair trade practices by “dumping” steel at prices below its manufacturing costs.
The U.S. steel industry reportedly now only operates at just over 70% of capacity, with about a fourth of the steel consumed in the country coming from imports.
China is now the number one steel producer in the world, producing just over half of the world’s total production. The U.S., which used to be first, is now fourth, also behind Japan and India, respectively.
Late this month the American Institute of Steel Construction (AISC) testified to the Commerce Department, asking it to consider “imposing trade remedies” on fabricated steel being imported into the country. Doing so “is essential to preserve the capacity of U.S. steel fabricators to serve critical national defense and security needs,” David Zalesne, vice chair of the AISC Board of Directors, testified.
According to the association, “imported fabricated structural steel has increased 136% in the past five years,” a much higher growth rate than the U.S. market experienced in the same time period.
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