US still expected to impose steel tariffs

21 Aug 2017

US president Donald Trump is still expected to impose steel import tariffs on national security grounds despite the delay of a probe into the matter and pursuit of multilateral talks to reduce excess capacity, industry players and trade experts say.

US steel stocks have fallen nearly 10 per cent since Trump delayed the release of the so-called “Section 232” review of the US steel industry in July, partly reflecting fears that his promises to protect the industry may not materialise.

But industries analysts say the falls might be overdone, and there is reason to think that import relief may still happen.

“Based on (Commerce Secretary Wilbur) Ross’s recent statements and our discussions with trade lawyers engaged in section 232, we still expect measures that will have a positive impact on US steel prices,” said Seth Rosenfeld, a steel industry analyst at Jefferies in London.

“The most likely outcome is tariff rate quotas where the level of tariff changes dependent on the volume of imports. This structure serves as something of an upside cap on steel pricing so they do not get out of control,” Rosenfeld added.

Trump launched the investigation into whether steel imports compromise US national security in April, boosting US steel stocks, but said in July a final decision might have to wait until other top-priority issues are addressed.

Ross said he would defer to Trump’s lead and also cited multi-lateral talks to reduce excess capacity, fuelling concern in the steel industry that the “232” review, initially scheduled to conclude in late June, might be scrapped or substantially watered down.

A Trump administration official told Reuters, however, that the steel investigation remains active and “is still under the final stages of review within the administration”.

“Our hope and expectation is that there would be action on (section 232) sooner, rather than going the full time,” said Tom Gibson, president of the American Iron and Steel Institute.

In a sign that some market players still anticipate a US tariff move, steel import permit applications fell 12 per cent in July from June, making up 28 per cent of the market, according to US Commerce Department data compiled by AISI.

Trump’s planned steel restrictions are mostly aimed at persuading China, producer of more than half the world’s steel, to cut excess production capacity, but direct imports from China into the United State have already fallen dramatically due to previous anti-dumping and anti-subsidy duties.

Instead, critics say broad new steel restrictions would hit US allies such as South Korea, Japan, Germany and Turkey much harder, prompting warnings of retaliation against unrelated US products. Diplomats also say “232” duties risk undermining the global trading system if national security becomes an accepted excuse to erect trade barriers.

Trump during his election campaign promised supporters in rust-belt states such as Pennsylvania and Ohio that he would restore steel and coal jobs.

US-based trade analysts say Trump may still turn to steel import restrictions because he can invoke them without congressional approval after suffering recent legislative setbacks.

“The healthcare bill went down, that’s a big loss. What is Trump going to do to shore up his base? He sees tough action on trade as a political winner. I think he’ll return to the matter before the end of the year,” said Gary Hufbauer, a senior fellow at the Peterson Institute for International Economics.

The steel investigation has also been caught up in Trump’s efforts to secure China’s co-operation to impose sanctions on North Korea. Trump has promised easier trade terms to Beijing if China helps rein in North Korea’s nuclear and missile testing.

Steel users in the United States who rely on cheap steel, oppose steel import restrictions, which they say would cost jobs in their industries. The US steel sector employs 147,000 people while manufacturing and construction employs 12.8 million.

Source-theaustralian