Steel Products

SMU Market Trends: Steel Execs Evenly Split on Trump Leveraging Tariffs

Written by Tim Triplett

Steel executives are evenly split on whether President Trump is making the right choice to use the Section 232 tariffs as leverage to negotiate better trade deals and quotas on future steel imports. Respondents to this week’s Steel Market Update market trends questionnaire expressed sentiments ranging from “it’s about time we had fair trade” to “building trade walls has never worked and never will.”

Following are some comments from steel executives who look favorably on Section 232:

  • “Fair trade” is all Trump ever wanted.”
  • “Whatever it takes for trade to be about us, for once, is fully justified. I love the language of reciprocal agreements. How could anyone be against that?”
  • “We always complain about Washington kicking the can down the road. Now along comes a guy with nerves of ‘steel’ who actually follows through on his promise, and we don’t like it. It is a nightmare for the short term. That said, let’s hope for quick resolution and reconstructed winning deals for the U.S.”
  • “The approach is correct. But we need someone besides Trump to be the spokesperson for what the U.S. is doing because we need the communication to be reliable. And when something is finalized, it should be finalized.”

But others question the Trump administration’s approach to trade negotiation:

  • “What happened to national security?”
  • “We would all feel better if we could see the president’s long-range plan as clearly as he does. It’s hard when he just says, ‘trust me.’ It might help us to understand and know what to do in the here and now.”
  • “I think we would have been better served if President Trump and the DOC were more strategic and surgical (specific country, specific product, 25 percent tariff, quota, effective period and sunset review period set in stone) rather than allowing exemptions with possible changes to be determined. Businesses will be able plan and manage risks more effectively with these details known and predetermined.”
  • “If you do something for the mills, something should be required from the mills. There should have been some type of regulations on the percentage of increases allowed for domestic sales to protect the consumers. A laddered approach of allowed price escalation that would expire in 6-9 months would have been much needed as we have experienced a 34 percent increase since October.”
  • “He’s going about it the wrong way by rewarding the mills and punishing certain groups of end users.”
  • “It’s very difficult in this environment to plan for future needs when the playing field is in constant flux.”
  • “The way this question is framed assumes Trump is truly using this strategically. I think that’s a stretch. If this were just a tactic, why would Gary Cohn have left?”
  • “Fair and open trade is necessary for a strong economy. But no one will work for pennies to make all the low-cost things we import. All these trade wars will lead to inflation and slow down our economy.”
  • “Quotas are the more correct way to go, like the recent South Korean deal.”
  • “With a caveat, we should have limited what domestic mills can charge. I think domestics are just letting Chinese steel back into the market. The end consumer ultimately loses. Eventually we will be back to where we were. We can’t realistically use 232 twice.”
  • “It does seem to bring other countries to the negotiating table. However, I believe it is damaging our relations with other countries and putting a lot of immediate risk on companies across various industries.”
  • “It’s difficult to run a business when the president changes his mind daily. What you think you have today, you may not have tomorrow.”

Will the 25% tariff on foreign steel hurt or help your business?

Responding to another SMU query, the majority (53 percent) of buyers think the tariffs will hurt their businesses. Of the remaining 47 percent, about half expect the tariffs to help and half expect no impact. Following are some of their comments:

  • “Although I buy through service centers, the light-gauge galvanized that we use comes from overseas. At least the competitive pricing is foreign pricing.”
  • “Short term there will be a positive effect until pre-announcement inventories are exhausted, then it will be negative as post-announcement inventories are sold. It remains to be seen how disciplined domestic mills will be when setting pricing given their tariff advantage. Current pricing is, in my opinion, moving into abusive territory.”
  • “I really believe tariffs will slow down building and hurt the economy in the long run.”
  • “Some customers are offshoring their tons and manufacturing. Having less competitive suppliers is bad for small to mid-size service centers.”
  • “My hope is that somewhat reduced supply will keep the market from being so volatile due to inventory swings.”
  • “There is an initial bump in cost, but it will ultimately slow the industry down. At that point, foreign finished goods will begin arriving and force some difficult choices.”
  • “In the short run, it’s a pass through, but eventually it will make imports noncompetitive.”
  • “Domestic mills have a created a price bubble, and it’s going to break.”
  • “Short term, the tariffs will help, long term hurt. It always comes back to tons. If Trump restricts tons per country, we have a chance. I’m guessing we’re cogs in a bigger wheel that we can’t see. But maybe I’m an optimist!”

Despite the tariffs, 88 percent of SMU respondents who source outside the U.S. say they will continue to buy foreign steel. “If the price is right,” said one. “Based on the allocation we are seeing in the market, we might not have a choice,” added another.

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