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WHAT DOES TRUMP’S PRESIDENCY MEAN FOR STEEL BUSINESS
After the whirlwind that was the United States election, Donald Trump will be occupying the House on the Hill in a week. The American populace will have their sights trained on Trump’s next moves as they hope he will live up to the more than ambitious promises he made. One of the promises that may have a huge impact on Trump’s presidency is what he said he would do for the steel industry.
7539776260_5b716c876c_oDecline of the steel industry
The United States relies heavily on steel. Almost every facet of its infrastructure uses steel. On paper, it would seem the steel industry is budding, except it’s not. Most of the steel used in the country comes from outside, mostly China. When Trump raised that issue during one of the presidential debates, there was a wave of approval as he pledged to revitalize the once budding sector.Trump heaped blame on China for dumping steel into the U.S ergo almost crippling production in the country. In itself, the blame quickly blew up in Trump’s face as it emerged that Trump had purchased steel from China to be used in the construction of his two buildings. While it evidently did nothing to dent his chances, there are jitters as to whether Trump can deliver and give back states like Pennsylvania and Ohio their former allure.
The war on Chinese imports
Chinese steel imports have been a major bone of contention for the US and Europe. China’s focus on manufacturing and job creation via Steel makes steel from the country unrealistically cheap, at least for the U.S. Trump intends to heavily tax imports from China to reduce the flow of steel into the country. To the working man in the Rust Belt, that is good news, but to economists, it might not be the best move.
Long-term implications
To the average voter, Trump might have meant well in promising measures to cut imports. However, that may yet again come to bite him and the American economy in the bum. Getting cheap steel means infrastructure costs remain relatively low. Unless Trump can low ball China’s steel, the cost of infrastructure is bound to go up no doubt.
Trump’s ‘war’ on free trade leaves out a key factor. By protecting American businesses and more or less punishing trade partners like China could lead to the average American feeling the pinch as they dig deeper into their pockets for consumer items. It may look like revamping steel will benefit the steel worker in Ohio or Cleveland increasing production costs means a spike in the final cost of goods.The ripple effect of protecting one sector is that it trickles to other sectors that enjoy the most affordable material. Once Trump starts protecting all the businesses in the country, there may be retaliatory actions by the countries he is punishing. Consequently, the already heavily taxed American will begin to feel the effects of misplaced promises each time they buy something.
In the midst of all the uncertainty, steel companies in the US seem to be benefiting from Trump’s promises as stocks for most of those companies rise steadily. Big players such as US Steel and Steel Dynamics have experienced a boost in stock price by about 160% and 60% respectively.The implications notwithstanding, steel magnates are keen to see their ventures become great again.