Steel Summit: Dr. Basu blames tariffs for riskier path ahead

Basu, chairman and CEO of Sage Policy Group, noted that the US Federal Reserve has a 2% target rate for inflation, but “this country has not been at that 2% target for more than four years.”

He warned that the new round of 50% Section 232 tariffs on steel, aluminum, and other commodities could push the US further from the Fed’s 2% inflation target.

“I blame tariffs,” he told the crowd. “They would tend to be inflationary. Interest rates will be higher for longer as a result.”

The economist painted a picture of the American consumer still buying but running out of fuel. After spending down their pandemic-era savings, consumers have turned to credit cards, and delinquencies are now on the rise.

So tariffs are adding pressure to a system already stretched thin.

For steelmakers, that matters because weaker spending hits construction, autos, and appliances – all core drivers of steel demand.

Global headwinds aren’t helping. “You’ve got overcapacity already in the world,” said Basu. “China’s real estate crisis continues to linger, interest rates are high, and demand growth is slowing.”

With tariffs fragmenting trade, he added, “It’s very difficult to establish a stable equilibrium.”

Basu pointed to construction as a weak spot, noting that “non-residential construction spending has been down since 2024.” He said high borrowing costs and shaky confidence are slowing project starts, even with some bright spots in data centers and power-related builds.

“When financing costs are onerous, you need confidence to move forward. Right now, that’s lacking,” he remarked.

He also warned about the current political backdrop. “To predict the trajectory of the US economy, you’ve got to read the mind of Donald John Trump,” he declared. “Policy making remains unsettled.”

Still, Basu admitted the US economy has been more resilient than expected. “I underestimated US economic strength in both 2023 and 2024. Recession is quite unlikely, as it turns out right now,” he stated.

But the outlook, he noted, “has risks that did not previously exist, including rising interest rates and falling asset prices.”

For the steel crowd in Atlanta, the takeaway was clear: Business is holding up, but the ground underfoot is shifting. Tariffs, interest rates, and consumer pressure could all reshape the market in the months ahead.

As Dr. Basu put it: “Uncertainty or volatility, one of those two, has been the watchword for this conference.”