SMU Data and Models

SMU Market Trends: Steel Buyers Say Tariffs Weaken Manufacturing

Written by Tim Triplett

Eight out of 10 respondents to Steel Market Update’s market trends questionnaire last week (just prior to President Trump’s announcement confirming the 25 percent tariff on steel imports) believe tariffs on foreign steel will weaken the steel and manufacturing base in the United States. Following are some reader comments, nearly all opposed to the Trump administration tariffs:

  • “I think it could have a strong negative effect long term.”
  • “It’s a short-term win for domestic mills, but bad for the manufacturing base.”
  • “Long term, this is a disastrous move if it stays in place for any length of time.”
  • “Yes, steel will be strong, but no, manufacturing will be weaker, and in some cases crippled.”
  • “Short-term gains and long-term pains. Finished steel products will move to more efficient countries that do not rely on protectionist measures to compete. If the U.S. puts a bubble over its country and ignores global progress, we will lose more jobs in manufacturing.”
  • “I’m with those who believe the price of steel isn’t so great it would affect the end user (us) that much. And I think it would only be short-term as the domestic mills would open more capacity, creating more supply and in turn lowering pricing.”
  • “It just creates inflation…domestic steel prices will be out of sight.”
  • “Basic economic fundamentals will play a role. It will destroy the jobs it claims it was protecting.”
  • “Overall, I think it’s positive, but it will be difficult for everyone to get used to fair and balanced, we’ve been so lopsided for so long.”
  • “It will negatively affect our business by raising the costs of steel and hurt our customers’ share of export business. We don’t know how severe the negative effects of tariffs will be or if a trade war will ensue.”
  • “Offshoring will grow exponentially. Domestic manufacturers of products with a high steel content will not be able to compete against imported finished and semi-finished parts.”
  • “It will kill manufacturing in the longer run as steel mills raise costs to line their pockets. Final customers will find replacement products such as finished goods and we will all lose out in the end except for the few domestic steel mills.”
  • “Short term, it will help the domestic mills if they handle themselves in a conservative manner and reinvest some of these profits in cost-saving capital improvements and take offline some of the antiquated mills still around producing inferior and high cost products. If mills go for the pot of gold right away, they will create a recession and stall the momentum in the marketplace as consumers will slow buying and larger expenditures will be put on hold.”

The majority of respondents (57 percent) say they will continue to buy foreign steel in spite of any tariffs. Some of their comments:

  • “U.S. mills will continue to raise prices until imports come back regardless of the tariffs, and they will alienate their customers.”
  • “There is not enough supply for steel domestically, so imports will find a way in, even with a 25 percent tariff.”
  • “We’ll buy foreign where the price allows us to. Domestic prices have already increased to a level where foreign may be competitive even with the tariffs.”
  • “If domestic pricing stays above $850 per ton for hot rolled, I believe many countries can and will still import and even with the duty be happy to fetch that price.”
  • “We don’t buy foreign carbon steel today for our U.S. operations, but I’m now actively looking to offshore components as a countermeasure. The alternative is my company may offshore finished-good production.”

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