Trade Cases

SMU Market Trends: Does the Steel Industry Still Need Section 232?

Written by Tim Triplett

December 21, 2017

With demand fairly strong and prices rising, two out of three respondents to this week’s Steel Market Update market trends questionnaire feel there is no longer any need for President Trump to act on Section 232 ahead of the mid-January deadline.

Earlier this year, the Trump administration instructed the Commerce Department to investigate whether low-priced steel imports pose a threat to the U.S. steel industry, and thus to national security, under Section 232 of the Trade Expansion Act of 1962. The administration originally planned to impose new Section 232 tariffs or quotas on steel imports in June, but then delayed action in the face of strong opposition and has left the market hanging for months. Commerce and the president have a matter of weeks to act on the controversial measure, unless they choose to let it lapse. Following are some of the more insightful comments from steel buyers this week:

Some still favor Section 232:

  • “Section 232 is needed for a few select countries and products.” Service Center/Wholesaler
  • “Yes, but it needs to be reasonable. Exclude all .016 and lighter HDG that the domestic mills don’t want to make anyway.” Service Center/Wholesaler

Many don’t now, nor ever did, support Section 232:

  • “Section 232 would totally disrupt the market. Nothing worse could happen.” Trading Company
  • “The president was never justified to act on Section 232. Such drastic protectionist measures are not good for global trade. If he acts on it, he will likely exempt half the countries.” Manufacturer/OEM
  • “We never did need Section 232. Please correct me if I am wrong, but why are our domestic prices higher than the rest of the world? Then the domestic mills want even higher pricing. Soon everybody will make finished goods offshore. Then none of us will have the problem anymore because there will be no business.” Service Center/Wholesaler
  • “When the Defense Department turned against Section 232, it was the strongest signal yet that it’s not needed.” Steel Mill
  • Section 232 will happen, but I expect it to be watered down. Watch for a surge of Vietnamese material in the interim as the preliminary decision on circumvention empowers the trading community.” Trading Company

One observation from a service center executive that all can agree on: “The president needs to act to create visibility and allow businesses to plan for their year. Conclude it one way or the other.”

Tim Triplett

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Price: Should billions in Section 232 revenue go to foreign manufacturers or to the American people?

Do we want the benefits of the Section 232 tariffs to flow to the bottom lines of foreign steel and aluminum producers or to the US government and, ultimately, domestic manufacturers and their workers? In our view, the answer is simple. Section 232 exceptions do nothing more than lead to underserved profits for foreign manufacturers who are harming the US industrial base. That revenue could be used to pursue the Trump administration’s other policy priorities - such as deficit reduction or expanded tax cuts.