Leibowitz: The consequences of a new barrage of trade cases on coated steel

Thin gauge in thin supply?

A third standard feature is that the petitions are not limited to products that the domestic industry actually makes. Certain dimensions, especially thin gauges, are not produced by US mills. Why? Because they want to maximize profits by running through their hot- and cold-rolling mills the maximum tonnage.

Thin gauges require more attention to tolerances and reduce the tonnage per unit of time that runs through the mills. Based on the available evidence, domestic producers are not interested in thin gauges. Yet the petitions include those thin gauges within their scope.

What is unusual is the market situation surrounding these cases. In most major case filings, the domestic industry pointed to low import prices. Yet prices in the US now are declining because of a lack of demand rather than cheap imports. Not only that — even with declining prices, the US prices of these products are also the highest of any major world market. That is a result of tariff policies in the last six years or so.

High costs could push manufacturers abroad

Any major producer of products with significant steel content is likely to be looking at how to avoid these high prices that rob them of competitive advantage. That includes autos (body panels and components), appliances, production machinery, and tires (think radial tire cord).

The industry must have concluded that imports of corrosion-resistant steel are a threat that will only get worse. I am not convinced that the industry is right about that. But I am pretty sure that the recent sag in US demand, which has seen import levels decline in the last three months or so, is at least in part due to a rethinking by steel users about where to produce. Tariffs (Section 232, Section 301, as well as antidumping and countervailing duty cases) seem to be a permanent feature of doing business in the US. The result: Many steel consumers might be wary of making substantial manufacturing investments in the world’s highest-priced steel market.

The domestic steel interests do not seem to be worried about that. Perhaps they are counting on the government to impose more restrictions on imports of downstream products, such as autos and capital goods. These are, at least for the most part, covered by Section 232 tariffs. Section 301 tariffs only apply to China. So covering downstream goods would be a major hit on US consumers who are just now seeing reduced (but not eliminated) inflation.

Steelworker clout at consumers’ expense

The two major political parties also seem to be unconcerned. But they should not be so sanguine. Consumers will certainly notice persistent price increases above the levels of other major markets. And businesses will continue to be frustrated by government inattention to the consequences of high tariffs on what used to be globally competitive industries. During the campaign, scant attention has been directed to the widening US trade deficit, which widens not only from increasing imports but also from decreasing exports. In 2023, both total imports and total exports declined slightly from 2022 levels.

Protectionist trade policies have clearly intensified over the last six years. The Trump tariffs were largely continued under President Biden. Consumers, both businesses and individuals, have been largely ignored. Trade cases proliferate because the law ignores consumer welfare in imposing duties.

The consensus between Republicans and Democrats on these points can be explained, at least in part, by the incredibly tight poll numbers leading up to election day. Steel producers in particular have argued that the global market is unfair to them. And policy makers have bought the argument. Even if politicians realize that we cannot disengage from the world (we are even having trouble disengaging from one country — China), the runup to the election requires courting groups of voters (such as steelworkers) who believe they are victims of unfair trade practices by allies and adversaries alike. As long as the races are tight, neither party is likely to adopt rational choices for trade policy.

An irrational choice: Opposition to Nippon-USS deal

What would such rational choices look like? For me, it would require asking protected industries to get better at competing in global markets. We inhabit the same planet as the Chinese, and the Russians, and the Iranians, but we can’t seem to connect measures, such as antidumping and countervailing duties as well as Section 232 and 301 duties, with a requirement to improve competitiveness so that these measures will actually help create better markets.

One example of this policy myopia is the political opposition to the acquisition of U.S. Steel by Nippon Steel. Having looked at this acquisition carefully, I can only say that the only argument against it is political. Candidates from both parties are desperately going after steelworkers’ votes. The economic logic of the acquisition is largely ignored. Nippon Steel is based in one of our most stalwart allies. And that company has made clear its intention to restore U.S. Steel to global competitiveness, without sacrificing workers.

The opposition from President Biden, Vice President Harris, and Donald Trump has revealed that there is little concern at the political level for the future of U.S. Steel.

Editor’s note: This is an opinion column. The views in this article are those of an experienced trade attorney on issues of relevance to the current steel market. They do not necessarily reflect those of SMU. We welcome you to share your thoughts as well at info@steelmarketupdate.com.