An already Bad Week for American Steel is about to get a Lot Worse

By: Tom Jankowski

The recently approved tariff payment delays on steel will open the U.S. market to dumping from Chinese manufacturers

It has been a strange few weeks for politics in America. Lifelong staunch conservatives were among the main supporters of the $2 trillion stimulus package aimed at mitigating the adverse economic impacts of the COVID-19 pandemic while liberals argued against it. President Trump was not immune to these odd ideological switches as it was announced last Wednesday that the U.S. would allow the delay in tariff payments on items such as medical supplies and steel after being urged to do so by various business groups.

Throughout the president’s first term, tariffs have become his go-to weapon for protecting domestic manufacturers and the working class that they employ. However, given the extraordinary circumstances, the president has violated his promise of protecting age-old American industries – such as steel manufacturing – from its Chinese competitors. Instead, he has pushed to maintain  relatively affordable production on all goods that require the material. In fact, this move may harm companies, such as U.S. Steel, who have already felt the effects of the ongoing pandemic.

Chinese manufacturers have been stockpiling steel due to the decreased domestic demand in manufacturing caused by the virus. By delaying tariff payments, the White House is essentially giving these manufacturers a license to dump their surplus on the U.S. market. Dumping refers to the selling of goods in foreign markets below the equilibrium price. Tariffs are meant to prevent such practices and have been implemented by the Trump administration on Chinese steel in the past for that exact purpose.

With the temporary delay of these protections, however, some “ two million U.S. workers directly or indirectly dependent on [the] industry” will suffer according to an open letter written by various executives of major U.S. steel manufacturers.  Companies such as U.S. Steel have already been impacted from the pandemic, with its stock price dropping rapidly since January. This deterioration will likely continue well into the year as Chinese steel now poses an even greater threat to the industry than it did before.

The bleak projection for the industry is accompanied by the massive stimulus package signed into law by the President two days ago. It will extend aid to millions of struggling workers throughout the country. However, the concurrent tariff delays will undo the positive effects of the stimulus package for the millions of Americans involved in steel production, as many domestic manufacturers may incur substantial losses as a result of the Chinese dumping.

While the concerns voiced by the steel manufacturers are warranted, it seems as though the industry will be a necessary casualty in combating COVID-19 as the tariff delays will make raw materials more affordable for other sectors (therefore possibly helping kickstart the economy by increasing manufacturing) and will bring in medical supplies which areas such as New York are in desperate need of.

As such, we are increasingly seeing that there is no solution to this issue that will both combat the virus and maintain the stability of all major industries. American steel will most likely suffer significant losses, and those involved in it will be harmed. Aside from being hurt by the pandemic itself (like various other businesses), the industry will incur even more significant losses as the government is sponsoring programs that will actively go against its recovery from the initial shock of the outbreak. Unfortunately, these trade-offs must be made for the greater good and American steel manufacturers, and those that they employ, are amongst those that seem to be getting the very short end of the stick.

Works Cited:

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Evans, S., & Ker, P. (2020, March 3). Steel stockpiles in China a worrying signal. The Australian Financial Review. Retrieved from https://www.afr.com/companies/manufacturing/steel-stockpiles-in-china-a-worrying-signal-20200302-p54617

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Hughes, S., & Andrews, N. (2020, March 27). Trump Signs $2 Trillion Coronavirus Stimulus Bill After Swift Passage by House. The Wall Street Journal . Retrieved from https://www.wsj.com/articles/house-lawmakers-race-to-washington-to-ensure-coronavirus-stimulus-passes-11585318472

Mauldin, W. (2020, March 25). U.S. Will Approve Some Delays in Tariff Payments Amid Coronavirus Crisis. The Wall Street Journal. Retrieved from https://www.wsj.com/articles/u-s-customs-tells-importers-it-will-approve-tariff-delays-on-a-case-by-case-basis-11585144953

NYSE American Steel Index. (2020, March 29). Retrieved March 29, 2020, from https://www.marketwatch.com/investing/index/steel?countrycode=xx