Price: Setting the record straight on steel as the summer of trade heats up

These significant new developments are summarized below. But first, I am obliged to set the record straight on the state of play for the domestic steel industry.

Setting the record straight on steel

Last week in this space, Lewis Leibowitz opined that domestic steel production is “well short of demand,” that domestic steel is “not in the right places to meet the needs of [US] steel customers,” that “Western US needs steel imports,” and that tariffs on imported steel “shift burdens to steel-users rather than easing them.” I disagree with these characterizations of the US market.

First, demand may exceed US production, but it does not exceed US capacity, and that’s the key point.

According to data collected from the American Iron and Steel Institute and made available through the International Trade Administration, nominal US capacity exceeds domestic demand significantly. The reality is that US producers are more than capable of supplying the entire US market except for some niche products like electrical steel and tin mill products—and even those gaps are closing as US producers make significant investments in US capacity under cover of US trade measures.

As reported by Steel Market Update, last month domestic steelmakers explained to the Congressional Steel Caucus that, due to US trade measures, import market share is down 30%, to their lowest levels in 30 years, and US capacity and capacity utilization is rising. Based on these signals, the US industry has invested more than $25 billion in domestic steelmaking operations in recent years, adding more than 10,000 jobs by building multiple greenfield mills, rebuilding blast furnaces, restarting idled lines, and rebooting a 500,000 short-ton/year tin mill, among many other projects.

Second, US customers have access to domestic steel, including on the West Coast, as steel moves freely throughout the United States. Mr. Leibowitz’s purported imbalance between levels of West Coast steel production and West Coast manufacturing ignores several intervening variables, most notably that steel demand is not distributed based on manufacturing output.

West coast steel consumption is largely driven by construction, not manufacturing. Further, West Coast manufacturing is far less steel intensive than other regions of the United States because it is focused on high-value aerospace and tech industries. This is why only ~9% of finished steel imports entered through pacific coast ports in 2025. In contrast, auto-related steel production is concentrated in the Midwest and the South because that is where auto producers are located.

Furthermore, low-priced imports shipped from Asia to the West Coast (as Asian markets unload staggering levels of excess capacity) were only hurting the West Coast’s chances of maintaining higher levels of domestic production.

So not only is the apples-to-oranges comparison of steel production and manufacturing-at-large unavailing, Mr. Leibowitz’s point about the relationship between imports and US production is backwards, as a general matter. Tellingly, since Section 232 measures took effect, the first new steel mill is being built in California in over 50 years.

Third, the argument that tariffs shift burdens from steel makers to steel users is inaccurate. The actual “burden” of these trade measures falls on the cottage industry of businesses that have a dedicated interest in steel imports by undercutting domestic industry prices. These businesses often import low-priced steel opportunistically, irrespective of US supply and demand factors, and the tariffs are designed to mitigate their strangle-hold on domestic prices.

Trade measures allow the domestic steelmaking and steel-using industries to reach a market-based equilibrium that is not held hostage by imports priced well below US producers’ costs of production.

Say what you want about the full-court press on US trade measures, but Leibowitz now argues that the domestic steel industry is not in decline. He stops short of the relevant question: what has changed? The domestic industry has long argued that all they needed to serve the US market was a level playing field. Mr. Leibowitz consistently agued the opposite, opposing US trade cases, and instead supporting the interests of trading companies and import brokers whose business is to maximize imports.

The reason the US industry is rebuilding is because—contrary to the arguments made by Mr. Leibowitz and others—the US government prioritized national security and trade law enforcement over the interests of trading companies seeking to entrench US dependence on steel imports.

Section 338 Announcement

On July 20, President Trump polished off another long-dormant trade tool, invoking Section 338 of the Tariff Act of 1930 (“Section 338”) to impose 50% tariffs on certain goods of Canada, including United States-Mexico-Canada Agreement (USMCA)-compliant goods, effective August 19, 2026.

According to the USTR’s press release, the tariffs impact nearly $20 billion in annual imports of goods from Canada, which the Administration reportedly cobbled together to reach that monetary threshold. Duties are capped at 50% and can be made effective 30 days after they are proclaimed.

The 338 duties will not apply to products already subject to Section 232 tariffs, including certain steel, aluminum, and copper products, but they will apply to goods otherwise covered by USMCA.

Section 338 authorizes the president to impose duties in response to a foreign country discriminating against US imports as compared to imports from other sources. The Trump administration determined that Canada discriminates against US imports of dairy, alcoholic beverage, and motor vehicle products. Section 338 has not been used in over 70 years and represents the latest creative reimaging of post-WWII era trade policy. The move is likely designed to bring the Canadians to the table for the re-negotiation of USMCA where the Canadians have taken a hard line approach, as we wrote about previously.

Section 301 Update

On July 23, the Office of the US Trade Representative (USTR) released the final determination in its investigations under Section 301 of the Trade Act of 1974 into unfair trade practices relating to forced labor of 60 US trading partners accounting for more than 99% of US imports.

The duties range from 10-12.5% depending on the country and took effect on July 24, replacing 10% global duties under Section 122 of the Trade Act of 1974 which expired contemporaneously.

These 301 duties do not cover products already subject to Section 232 national security duties, USCMA-compliant goods, certain textiles entered under the Dominican Republic Central America Free Trade Agreement (DR-CAFTA), and goods otherwise not subject to the expiring Section 122 duties. A long list of specific products including pig iron and certain ferrous inputs and waste are also exempt. In addition to these general exclusions, there are also some economy-specific exemptions for the UK, EU, Switzerland, Malaysia, Cambodia, Guatemala, El Salvador, Argentina, Bangladesh, Taiwan, Indonesia, Ecuador, and Jordan.