It’s been slightly over 48 hours since former Vice President Joe Biden has been declared the projected winner of the 2020 election, and though Donald Trump plans to challenge the results in court, many are planning for the future-- and wondering how the US domestic steel industry will fare under a new administration.
The most prominent questions are related to the long-term viability of Section 232, and whether the long-discussed infrastructure bill will finally get passed.
Section 232
In March 2018, the Trump administration announced sweeping 25% tariffs on foreign steel. The decision to implement the tariffs was interlinked with two goals: revitalize the domestic steel industry and create jobs. The immediate impact of Section 232 was undeniable: imports all but dried up and domestic steel prices shot up roughly $10.00 cwt. ($220/mt or $200/nt) overnight.
However, earlier this month, Forbes reported that steel and aluminum tariffs not only led to reductions in domestic manufacturing jobs, over the medium-term, they did not add jobs to the steel sector.
And while many within the steel industry continue to support the tariffs, their staying power under Biden has come under question.
“I believe that they will negotiate [Section 232 tariffs] on case by case basis starting with European allies and some strategic partners like Taiwan and others,” a Midwest-based source said.
Another source offered an alternate perspective. “Overturning Section 232 is not the most important item on his to-do list,” he noted. “Biden got the support of the steelworker’s union, and they will want to have a say in this. My guess is that in two years’ time we’ll see a reduction, in three years a revocation.”
Infrastructure
The US economy was dealt a striking blow during the early days of the COVID-19 pandemic, which led to widespread belief that congress would finally pull together to pass an infrastructure bill. And while the House of Representatives passed a $1.5 trillion infrastructure spending bill in early July, the legislation was dead on arrival when it reached Senate, because in addition to including more than $300 billion for repairing bridges and schools and $100 billion for new public transit funding, the bill also included $100 billion for broadband internet access, $70 billion for clean energy projects, $25 billion for clean drinking water and $25 billion for the postal service.
Senate Majority Leader Mitch McConnell didn’t allow the bill to reach the senate floor, noting opposition to the addition of non-infrastructure related spending.
Some believe that a new bill is likely to emerge once Biden takes office.
“Yes, I believe that there will be a bill at some point and I believe that infrastructure will be a fairly easy bipartisan lift,” one source said. “The hold-up will be the size of the bill and of course, how to pay for it. Will it happen in 2021? I’d lay those odds at about 50/50, but slightly leaning in favor.”
An East coast-based trader agreed.
“I think we’ll get an infrastructure bill. The size will depend on how the Senate [race] shakes out but I don’t think we’ll be talking something spectacular either way.”
The current political makeup in the US Senate is 48 Democrats and 48 Republicans, with 2 seats in Georgia heading for a runoff election. The outcome of the election, which will take place on January 5, 2021, will determine which party takes control of the Senate.
"The direction and extent of Federal Policy in many ways hinges on the outcome of the Senate," said Ascent Consultants Managing Director Matt Beckmann. "The Executive Branch will have the ability to reshape international trade policy largely independent of the Senate. However, whether or not we see Biden (or others) pushing to implement the Biden-Sanders Unity Plan, [which includes agenda items such as an expansion of government-run healthcare plans, sweeping criminal justice reform, efforts to reduce greenhouse gas emissions, and a focus on undoing Trump-era policies on immigration, among others] will largely hinge on who controls the Senate."
Another source said he’s also keeping close tabs on the Georgia senate races.
“A lot of this will depend on who ends up controlling the senate and whether Biden is able to keep from going too far left with his agenda,” he said. “If we can keep our energy production on tack without driving up costs, and the Trump administration’s tax cuts stay in place, and we don’t lock back down due to the coronavirus, I think the outlook is good. If not, then hang on for a dismal four years.”