Final Thoughts

Taylor is Alan Beaulieu’s protégé at ITR. Many of you know Alan from his talks at SMU Steel Summit. I found Taylor’s analysis just as insightful as Alan’s.

2025 is looking great!

One thing that grabbed my attention was his surprisingly bullish outlook for 2025. Check out the chart below from ITR, for example. (Editor’s note: You can click on all charts in this article to enlarge them for easier reading.)

There has been a lot of red and yellow this year across a range of sectors. That indicated a contraction in demand or slowing growth, which tracks with a mostly sluggish steel market in 2024. In 2025, in contrast, it’s almost all green – meaning accelerating growth.

Also worth a look is the chart here:

Taylor predicted that inflation would be relatively tame in 2025-26, at least by the standards of recent years. But he also warned on the call that there was a big upside risk to that forecast: tariffs.

Unless tariffs get too big

Inflation in the producer price index (PPI) – the cost that businesses pay for goods – could soar from a predicted range of approximately 2.5-3.5% to 5-7% if we see blanket tariffs under a second Trump administration. “It’s important to have a contingency plan for that,” Taylor said.

Here’s another slide from his presentation that’s worth considering:

The US, according to ITR, has 7.3 million open jobs and about one million legal immigrants. That’s obviously not enough to fill the gap. And don’t count on illegal immigration to help bridge it either.

“The upcoming administration is going to take a pretty hard stance on some of that illegal immigration,” Taylor predicted. His suggestion: Invest in automation and innovation now to offset the potential labor squeeze.

The good news? Lower interest rates next year could spur just that kind of capex ramping up, he said. The bad news? There are risks to that forecast too.

A potential combination of higher tariffs and a tight labor market probably wouldn’t prompt the Federal Reserve to raise interest rates. But it could force the Fed to “freeze” decreases, Taylor said.

What will Trump do?

Will tariffs be used as a negotiating tool? Will they be targeted? Or will President-elect Trump hammer allies and foes alike with broad-based tariffs? It’s not an easy question to answer.

President Joe Biden and his administration arguably didn’t do enough public interviews about the goals and objectives of their trade and manufacturing policies.

You could make a case that President-elect Trump and his incoming administration are communicating too much – and that the messages are often mixed. Perhaps by design, perhaps because various nominees don’t see eye-to-eye.

The smart money seems to be on Trump’s tough talk on tariffs being mostly a negotiating tactic

Smart money vs crazy money

That said, I remember attending a conference in Pittsburgh in the spring of 2007 when an economist from a large bank said the “smart money” was on Hillary Clinton to win the election. Barack Obama became the next president in 2008.

It was a similar story in 2015. In fact, the first person I remember saying with confidence that Trump would win was my mother-in-law – a retiree from Taipei.

It was during a grocery run to a Korean grocery chain for ingredients to make dumplings with. As we picked through scallions, she said Trump would win. I said Americans weren’t that crazy. The smart money was on Jeb Bush or Hillary Clinton. She insisted that Americans were very crazy. (Not necessarily in a bad way.) And that Trump would win – which was very much an outlier position at the time.

Something similar happened again this cycle. Betting markets were more accurate than pollsters. So how smart is the smart money? (I am biased. My in-laws like to gamble. And my wife and I were married in Vegas.) That said, I feel a lot of sympathy for the smart money. Because people – and the politicians who represent them and reflect them – sometimes do crazy things. And crazy is a lot harder to predict that logical.

Where am I going with all this? For starters, I’m overdue to catch up with my mother-in-law. And also…

Tampa Steel Conference

Nearly 300 people have registered for the Tampa Steel Conference on Feb. 2-4. You can find the full agenda and register here.

Trade and tariffs will be a big focus of the conference, especially since we organize the event together with Port Tampa Bay.

We should have a better idea of what the tariff landscape looks like when we gather in February. And you’ll have an opportunity to listen to some of the sharpest minds in steel – and ask them what it all means for your business.

Don’t miss out, register today!