Sunday, December 8th, 2019

Will Tariffs Help US Steel Makers?

 

The Trump administration is talking about levying tariffs on imports of foreign steel. The New York Times discusses steel tariffs.

The Trump administration is expected any day now to make its long-awaited decision over whether to slap tariffs on steel imports. Doing so would be a provocative move that could simultaneously lift the spirits of President Trump’s most ardent supporters while angering trade partners.

The tariffs could very well provoke a global trade war that could make all sides poorer.

It’s an unusual time for a protectionist retreat by the United States as a number of major industrialized countries work on their own free trade pacts. This week, Europe and Japan reached a landmark free trade agreement before the G-20 summit, and Mexico and China, two of the United States’ largest trading partners, have been mulling their own deal.

The problem is that while tariffs may cause retaliatory measures from other nations they will not necessarily help US workers. A telling comment is that there are a lot more workers who make things from steel than workers who make steel. Higher steel prices will harm more workers that it helps. Who are the United States steel companies that might be helped by tariffs?

U. S. Steel Companies

United States steel producers are AK Steel, Carpenter Technology, Commercial Metals Company, Nucor, Steel Dynamics, and U.S. Steel. The US steel industry is the third leading producer of steel in the world after China and Japan. Options trading of US steel companies indicates that traders believe there will be tariffs and that these companies will prosper. Business Insider discusses the tariffs decision.

Traders in the options market are betting that shares of U.S. steel makers will get a boost when the U.S. Commerce Department unveils findings from its investigation into cheap steel imports, according to data and analysts on Friday.

But what happens when steel prices go up and the economy falters? Then steel sales will go down! Along the way folks seem to have forgotten the promised and not yet delivered Trump economic stimulus.

Where Is the Economy Going?

If the economy starts humming then steel sales and profits will go up even without tariffs. If the economy stagnates and especially if it is hurt by counter tariffs from trading partners then steel sales and profits will drop. The Huffpost discusses the potential dangers of Trump’s poorly thought out economic policy.

From the very beginning of his campaign Donald Trump has vigorously promoted his intention to get economic growth in the United States to at least 4%. Improving growth rates would reap great rewards for the American people especially in terms of job creation and higher real incomes. However, playing with the economy can be incredibly risky especially if you have no idea what you’re doing. Bullishly forging ahead with poorly crafted policies could have immense adverse effects.

First of all movement on tax cuts, foreign corporate cash repatriation and infrastructure spending is almost nonexistent. But if Trump gets his wishes there is valid concern that absent a huge increase in the worker pool that his measures will do anything other than add to the national debt.

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