US DOC releases recommendations for strong steel tariffs or quotas under Section 232
US Department of Commerce Secretary Wilbur Ross publicly released his recommendations to the president following the conclusion of the Section 232 investigation into steel imports, with three import remedy options:
- A global 24 percent tariff on all steel imports from all countries.
- A tariff of at least 53 percent on steel imports from Brazil, China, Costa Rica, Egypt, India, Malaysia, Korea, Russia, South Africa, Thailand, Turkey and Vietnam.
- A quota on all steel products from the aforementioned countries equal to 63 percent of their exports to the US in 2017. All other countries could export 100 percent of their 2017 export levels to the US, but would still be subject to tariffs.
According to news reports, the DOC expects each of these remedies to increase US domestic steel production from its current capacity utilization rate of 73 percent to 80 percent.
Additionally, if implemented, the tariff or quota options would be in addition to any duties already in place. The DOC also recommends a process be put in place to allow US companies to request exclusions from specific steel products if the US steel industry lacks sufficient domestic capacity to replace the imports, or for national security reasons.
Any exclusions granted could result in changed tariffs or quotas for the remaining products to maintain the overall effect.
The president has until April 11 to make a decision.
Reactions to the recommendations within the US steel industry were mixed, with sources from most steel producers, steel associations, and several large distributors expressing excitement, in contrast with traders, manufacturers, and smaller firms in the steel distribution chain that rely on imports to be competitive.
A joint statement from the National Tooling and Machining Association and Precision Metalforming Association said: “The recommendations by the Commerce Department to impose steep tariffs on steel would devastate downstream US steel consuming manufacturers who employ 6.5 million Americans, compared to the 80,000 employed by the domestic steel industry. If these tariffs are imposed, the US will become an island of high steel prices resulting in our customers simply importing the finished part and threatening thousands of jobs across the United States in the steel consuming manufacturing sector. The last time the US imposed steel tariffs in 2002, more than 200,000 American jobs were lost because of high steel prices due in large part to the tariffs. We urge President Trump, who campaigned to protect US manufacturing jobs, to reject these recommendations by the Commerce Department to avoid devastating the US manufacturing sector.”
One US-based long product trader concurred: “A 24 percent duty across the board for all steel items from all countries would have devastating consequences for the global steel business and possibly for the global economy.”
Other traders agreed, with many pointing out the notable exception of the EU and NAFTA partners from the remedy option targeting specific countries. “Whatever the eventual outcome,” one trader said, “there will be a very long list of exceptions to the rules. Red tape will flourish.”
At the NASPD conference currently being held in Houston, a representative from SteelOrbis inquired if a group of attendees were importers, to which one replied “Well we were, but it looks like now that we are going to be in a different business.”
On the positive opinion side, the Steel Manufacturers Association released a statement that said: “We applaud the release of the findings and recommendations contained in the Section 232 Report. Secretary Ross has accurately concluded that steel imports threaten to impair our national security from both a defense and critical industry standpoint. The Secretary has laid out options that have the potential to be meaningful and effective to address the threat the industry faces in light of global excess capacity and relentless steel imports.”
Some sources within the US domestic scrap industry also expressed optimism, hoping that an increase in domestic steel production would result in higher demand for scrap. Another scrap source said that while domestic growth “sounds good,” a long-term solution is needed for the overall industry. “It needs to balance job creation with the cost so the buying cycle continues,” the source said.
*This was published on SteelOrbis website on February 19, 2018.