Price: A whirlwind year for trade sets up a consequential Steel Summit

The SMU Steel Summit kicks off on Monday in Atlanta, and we could spend the entire time just discussing trade developments since the last Summit.

Remember where we were at this time last year? At the 2025 Summit, the second Trump administration was once again rewriting the rules of US trade policy.

Section 232 steel tariffs were upped to 50%. Country exemptions and tariff-rate quotas had been eliminated. Hundreds of derivative steel products had been brought within the program. And the administration’s expansive use of the International Emergency Economic Powers Act, or IEEPA, had placed tariffs at the center of nearly every major trade negotiation.

A year later, the pace has not slowed. But the strategy has evolved from demolishing the post-WWII trading system to replacing temporary or contested tariff authorities with an increasingly complex (albeit judicially battle-tested) structure built around Sections 232 and 301 as well as other established trade statutes.

The board was reset last year. This year, the pieces were moving.

IEEPA is gone, but the tariffs did not go away

For much of late 2025 and early 2026, the most important unresolved trade question was whether the Supreme Court would uphold the administration’s use of IEEPA to impose broad tariffs. The Federal Circuit had invalidated the tariffs. But they remained in effect while the Supreme Court considered the case. Meanwhile, importers faced mounting uncertainty about liquidation, potential refunds, and whether they needed to file protective actions at the Court of International Trade.

In February, the Supreme Court answered the legal question, but not all of the practical ones. In a six-to-three decision, the Court held that IEEPA does not authorize the president to impose tariffs. The decision invalidated the reciprocal tariff program and the IEEPA tariffs imposed on Canada, Mexico, China, Brazil, India, and other countries. It also left the lower courts and the government to work through an unprecedented refund problem. (It has now largely been resolved. Most of the duties have been refunded.)

Anyone expecting the decision to restore the pre-2025 trading system was quickly disappointed.

The administration immediately imposed temporary duties under Section 122 and announced plans for accelerated Section 301 investigations covering most major trading partners. Those investigations addressed forced labor, industrial excess capacity, digital trade, pharmaceutical pricing, ocean pollution, and other alleged unfair trade practices. The administration also preserved the collection of duties on de minimis shipments and continued to rely on the existing Section 232 and China Section 301 programs.

In July, as the Section 122 duties expired, USTR imposed forced-labor duties of 10% to 12.5% on 60 trading partners under Section 301. The administration also invoked the long-dormant Section 338 of the Tariff Act of 1930, which had not been used in more than 70 years, to impose 50% tariffs on certain Canadian products.

The Section 338 measures were primarily intended to be a negotiating tool with Canada. Implementation was briefly delayed due to the ongoing negotiations, as discussed below. Section 338 duties are now in place on $20-billion dollars in goods. And Section 338 is now another tool in the expanding tariff toolbox.

IEEPA was fast, flexible, and vulnerable. The authorities replacing it can be slower and more procedurally demanding. But they are expressly grounded in statutes authorizing tariffs. And some, like Sections 232 and 301, have already been tested in courts.

Put differently, the Supreme Court changed the legal route, but the destination remains.

Section 232 and Title VII trade remedies are the foundation

Through all this change, the Section 232 steel program and Title VII trade remedies (i.e., U.S. antidumping and countervailing duty law) have remained the foundation of US steel trade policy.

By and large, the Section 232 steel program has only grown stronger since last August. The 50% steel duties remain in place, and the program continues to cover an expanding range of derivative products. The administration has taken steps to address the undervaluation of steel and aluminum content in derivatives. And Section 232 products have generally been excluded from new Section 301 and Section 338 duties, avoiding cumulative tariffs while preserving the national-security program as the principal protection for domestic steelmaking.

Similarly, US antidumping and countervailing duty law is helping prevent import surges of specific steel products from other countries which, if undeterred, would cripple the US industry. These tariffs, which are derived entirely from an adversarial administrative process whereby the duties are calculated in direct relation to the level of dumping or subsidization of the subject imports, are essential for leveling the playing field for domestic manufacturers.

The results of these measures are becoming increasingly difficult to dismiss. As we noted previously, import market share is down 30%, to its lowest level in 30 years. Meanwhile, 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, installing new EAFs, modernizing and expanding old lines, and rebooting a 500,000 short-ton/year tin mill, among many other projects.

Critics sometimes argue that the United States cannot produce enough steel to meet domestic demand and that Section 232 and Title VII create a domestic supply problem. But that argument confuses production with capacity. Nominal US capacity substantially exceeds current domestic demand, with limited exceptions for certain specialized products. Lower-priced imports do not fill an unavoidable national shortage. Too often, they displace available US production and suppress the market signals needed to support domestic investment.

Section 232 and Title VII are not preventing the US steel industry from serving its customers. They are helping create the conditions under which the industry can invest, increase utilization, and serve those customers in the future. For those reasons, these programs remained on center stage over the past year and should be preserved moving forward.

USMCA reached a crossroads, not a cliff

Last summer, the USMCA joint review was approaching. This summer, the July 1 review date has passed without an agreement to extend the pact.

That does not mean USMCA has terminated. Despite the unrelenting chorus from free traders that anything other than an immediate and outright renewal would be a disaster, it was not. The agreement remains in force and can continue until 2036. But because the parties did not agree to extend it, the pact has entered a cycle of annual reviews. The United States is continuing negotiations, principally through bilateral discussions with Canada and Mexico.

To stimulate Canada to negotiate more seriously, the US launched a 30-day process to impose an additional $20 billion dollars of duties under section 338 unless Canada addressed a variety of trade practices that we see as discriminatory. This prompted a series of negotiations that went well beyond Section 338 and appeared to address a number of USMCA issues.

Naturally, the status of Section 232 tariffs has been a part of these negotiations with Canada. On Wednesday, Aug. 19, the Trump administration reportedly reached a tentative trade deal with Canada. The deal would have reduced Section 232 duties on certain steel and aluminum imports from Canada. The details were never finalized. And the negotiations collapsed on Friday evening.

It is too early to say where things will go from here, and it is not worth speculating about the deal that was close to being struck. Canadian news outlets are already predicting an escalatory cycle with disproportionate harm to the Canadian economy. But after some breathing space, it is reasonable to anticipate the parties will come back to the negotiating table.

We will see where things go from here. A sustainable USMCA agreement must support increased production in the United States first and foremost, while also supporting North America as a whole. Striking this balance will be a challenge.

The steel overcapacity crisis worsens

While the legal authorities and negotiations changed, the underlying problem did not. Global steel excess capacity continued to grow.

The OECD estimated global excess capacity at approximately 640 million metric tons in 2025. It projected an additional 138 million to 139 million metric tons of capacity by 2028. Its June 2026 outlook projected that excess capacity could reach 745 million metric tons by 2028, even as annual global demand growth remains below 1%.

China remains central to the problem. But the problem is global. Chinese steel demand declined in 2025. Its producers, however, did not meaningfully reduce capacity. This problem can only get worse as China confronts a demographic cliff and demand is projected to decline further by hundreds of millions of tons.

Instead of concrete action to slash capacity, Chinese steel exports doubled over three years. At the same time, Chinese-supported capacity continued to expand in Southeast Asia, India, the Middle East, North Africa, and elsewhere. More steel also moved through third countries or entered export markets in the form of downstream steel-containing goods. Perhaps the only realistic solution is for the Australians to radically restrict iron ore exports. Without a bold move to curtail capacity expansion and forcing shutdowns of excess capacity, protecting yourself is the only realistic solution for steel industries around the world.

Other countries now recognize what the United States understood earlier. The European Union proposed cutting its steel quota nearly in half and imposing a 50% tariff on imports above that level. Seventy-five new trade-remedy investigations were initiated worldwide in 2025. Governments that once criticized the United States for “protectionism” continue to criticize the US but are building their own defenses as excess capacity overwhelms their industries. Imitation is the best form of flattery.

The time for conferences that merely define the problem has passed. The overcapacity numbers are known. The subsidies are documented. The export patterns are visible. The price and volume effects of excess capacity cannot be addressed by limiting imports from just China.

What is needed now is action that each country can implement under its own laws. Endless negotiations to form coalitions of the willing just bog down the process and are best addressed after essential protections are erected.

A growing focus on enforcement and evasion

Tariffs on steel alone are not enough. Exporters respond through transshipment, minor processing, shifts in nominal country of origin, undervaluation, and the export of steel through derivative products. Trade enforcement and rules of origin must evolve as quickly as the evasion schemes they are intended to prevent.

To that end, in June 2026, the White House issued an Executive Order (EO) concerning Strengthening Customs Enforcement. The primary targets of the EO are foreign importers of record that do not have US-based assets. The EO instructs Customs and Border Protection and the Department of Homeland Security to impose heightened penalties (including enforcing liquidation damages against bonds, and a 50% floor and repeal of mitigation for repeat offenders), greater disclosure and certification requirements, and increased vetting procedures to prevent the importation of unlawful goods and to ensure that duties owed are properly collected. 

The EO also shines an enforcement spotlight on imports involving forced labor, misclassification, undervaluation, and illegal transshipment—including investigations under the Uyghur Forced Labor Prevention Act and the Enforce and Protect Act. We anticipate seeing the results of the new enforcement initiatives roll out over the course of the next year.

Supply chains are national security

The past year also provided more reminders that industrial capacity is not simply an economic concern.

China’s rare-earth export restrictions demonstrated the danger of relying on a controlled economy for materials essential to autos, semiconductors, energy, and defense. The conflict in the Middle East disrupted energy and logistics markets and constrained access to commodities moving through the Strait of Hormuz. These events followed the Covid-19 pandemic and the war in Ukraine, each of which exposed different vulnerabilities in globally dispersed supply chains.

These are not isolated accidents. Supply disruptions, geopolitical conflicts, and economic coercion are recurring features of the current trading environment. The supposed efficiency of sourcing critical products from the lowest-cost foreign supplier disappears quickly when that supplier stops shipping or when a strategic waterway closes.

That lesson applies directly to steel. A country that cannot reliably produce the steel needed for infrastructure, energy, transportation, and defense is not more efficient. It is more vulnerable.

What comes next?

Last August, we wrote that the postwar trading system was being replaced by a new game with evolving and uncertain rules. That remains true. But after another year, the broad direction of travel is clearer.

IEEPA tariffs have fallen, but new Section 301 tariffs have risen in their place. Other measures, like Section 338, were dusted off and proved to be useful tools. Meanwhile, Section 232 and Title VII trade remedies have survived judicial, political, and diplomatic pressure and remain the cornerstone of steel policy.

Enforcement of these and other trade measures is expanding. USMCA has entered annual review, and while no deal has been struck yet, the parties have entered negotiations. Global excess capacity has expanded. And US steel production, investment, and utilization have responded positively to stronger trade measures.

The lesson is not that every tariff is automatically good policy. Product coverage matters. Raw-material availability matters. Enforcement matters. And exceptions that undermine the purpose of a program can be as consequential as the tariff rate itself.

But the larger lesson is straightforward. A retreat to the old system would not restore stability. It would restore the conditions that permitted subsidized capacity, import dependence, transshipment, and the erosion of domestic manufacturing.

The administration should therefore protect the Section 232 steel and aluminum programs, close the remaining downstream and auto-parts loopholes, use the USMCA review to strengthen rules of origin, and pursue aggressive enforcement against transshipment, undervaluation, and other forms of tariff evasion.

All in all, it was an eventful year for trade. There will certainly be plenty to discuss in Atlanta. And we look forward to seeing everyone there!