Depositphotos 136330270 l 2015 - Federal Steel Supply

In mid-March, Canada’s Ambassador to the United States stated that he believes the United States steel tariffs may end soon. His speculation generated considerable media attention.

Now, some market analysts suggest support for ending the tariffs may prompt the Trump Administration to consider revising its policies.

The Recent History of Steel Tariffs

Nations sometimes impose tariffs in order to protect industries from low-cost foreign imports. During recent years, the rapid increase in steel production in China, and a number of other nations, created strong competition for U.S. steel producers.

Conventional steel mills that utilize blast furnace production methods maintain high fixed overhead costs. The loss of market shares to foreign firms caused some facilities in the U.S. to close. This created layoffs and a gradual decline in steel production capabilities.

By 2014, the United States imported 40.2 million metric tons of steel — a significant setback for a nation that once dominated the industry. Many observers also detected steel “dumping” by some mills based overseas.

Steel dumping involves selling a product below its manufacturing cost. As a result, it gains long term marketplace advantages (e.g. by driving competitors out of business). With low-cost steel flooding the domestic market, American steel manufacturers faced some hardships.

The U.S. filed some successful trade cases toward the end of the Obama Administration. Yet, by 2017, low-cost imported steel once again reached high levels in the U.S. It climbed to 34.5 million metric tons that year. President Trump’s tariffs aimed to protect the vitality of the U.S. steel industry.

Since that date, the volume of steel imported into the U.S. has fallen significantly. A number of steel producing nations, including Canada, have also imposed retaliatory tariffs against U.S. steel exports.

The price of the stock of some leading U.S. steel producers has risen during the interim and U.S. steel production has re-surged. There were both positive and negative outcomes, which we covered in an in-depth article last year on the impacts of the steel tariffs.

Why Steel Tariffs Might End Soon

Many foreign steel producers hope the Trump Administration will cease to impose tariffs on imported steel. Companies that export steel to the U.S. face stiffer competition when the U.S. imposes tariffs on their products.

Some of these producers argue that the imposition of tariffs has illegally restricted their competitiveness in U.S. markets. Additionally, consumers often pay less for metal products when domestic steel producers must lower their prices to compete effectively with imports. The automotive industry has experienced the brunt of this.

Since tariffs artificially create higher prices for imported goods, the use of this practice does not always promote long-term marketplace efficiency. Purchasers of American-made heavy equipment (such as farmers buying tractors) pay more for these products when steel tariffs are in place.

Some Steel Makers Want Tariffs to Stay

Many leading U.S. steel manufacturers believe the tariffs on imported steel should remain in effect. They claim that the Trump Administration imposed the tariffs on national security grounds to protect a vital industry from unfair steel dumping. It’s believed the reduction of U.S. steel production could leave the nation vulnerable from a defense standpoint. 

This position has generated litigation in some federal courts. Ultimately, whether tariffs continue or end may hinge upon the electorate. The public will need to decide whether they’re willing to accept higher prices in exchange for a domestic steel industry.