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3/01/2018 2:30 pm  #1

America First ! ! ! Well, kinda

Trump announced increased tariffs on imported steel and aluminum . . . and the stock market reacted negatively (I wonder if he’ll take credit for that), along with U.S. exporters of various products that tense for anticipated retaliatory measures by countries they ship to overseas.

Something tells me Trump and his group of economic advisors don’t think through their actions in a thorough manner. I guess they can sneak by living behind slogans.

Trump says U.S. to impose hefty tariffs on steel, aluminum imports

By Steve Holland and Ginger Gibson

WASHINGTON (Reuters) - U.S. President Donald Trump announced on Thursday he would impose tariffs of 25 percent on imported steel and 10 percent on aluminum, in a move the administration said would protect U.S. industry, but which critics said would fail to boost jobs and risked stoking a trade war with China.

Trump, speaking after a meeting with U.S. steel and aluminum makers said the duties would be formally announced next week.

“We’re going to build our steel industry back and our aluminum industry back," he said.

News of the tariffs drove the stocks of U.S. domestic steel and aluminum makers sharply higher, but also hit sentiment on Wall Street due to the potential impact of higher costs on consumers.

The move, which came after what one person with direct knowledge of the discussions described as a night of "chaos" in the White House due to frequent switching of positions in the administration, was sharply criticized by some senior Republican legislators.

“Every time you do this, you get a retaliation. Agriculture is the number one target. I think this is terribly counterproductive for the agriculture economy," said Senator Pat Roberts, who chairs the chamber's agriculture committee.

China has already threatened to curb imports of U.S. soybeans in retaliation, while the European Union has said it will consider action as well. China's top trade official Lui He is in Washington for trade talks.

After Trump's statement, AK Steel Holding (AKS.N) was up almost 12 percent, U.S. Steel Corp (X.N) was up 8 percent and Nucor (NUE.N) rose 3.6 percent. By contrast, industrial stocks such as Boeing fell, with traders citing tariffs, which would hit manufacturers' costs.

The administration says duties would protect U.S. industry, but critics say they would raise costs for industry and fail to deliver on a campaign pledge to boost domestic jobs.

It had appeared unlikely that Trump would announce the tariffs on Thursday after a night of back and forth inside the administration.

“There was a lot of movement within the past 12, 16 hours,” said the source who had knowledge of the discussions, but who declined to be named due to the sensitivity of the issue.

“It was going to happen. It wasn’t going to happen and then it did happen.”

The administration has also cited national security interests for its action, saying the United States needs domestic supply for its tanks and warships. Contrary to the action announced by Trump on Thursday, the Department of Defense had recommended targeted steel tariffs and a delay in aluminum duties.

Although China only accounts for two percent of U.S. steel imports, its massive industry expansion has helped produce a global glut of steel that has driven down prices.

Trade tensions between the United States and China have risen since Trump took office in 2017 and the administration is also pushing on what it regards as forced technology transfers to China.

Shares of Asian steel producers such as South Korea's POSCO <005490.KS> and Nippon Steel <5401.T> fell overnight.


While American steelmakers have lost three quarters of their jobs between 1962 and 2005, a major study by the American Economic Association showed that much of this had been due to improved production technology as output per worker rose fivefold.

"Thus, even if trade protection leads to increased domestic production, increases in employment may be far less than many hope," a report from the highly-regarded independent Econofact economist network said last week.

Consumers of steel and aluminum have lobbied hard against the tariffs. Econofact said in its report that two million jobs were in industries that use steel "intensively", including auto parts, household appliances, farm machinery and oil equipment.

Jobs in the consuming industries are concentrated in California, Texas, the Northeastern and Midwestern states that comprise the rust belt and states in the Southeast.

"Across many states, the number of jobs adversely affected in these steel-using industries could far exceed any steel jobs saved," Econofact warned.

"Past experience also shows that unilateral action like Section 232 tariffs will invite retaliation - the Bush-era steel tariffs led many countries to target politically sensitive U.S. exports like Florida oranges and North Carolina textiles."


3/31/2018 8:13 am  #2

Re: America First ! ! ! Well, kinda

Another indication that Trump’s tariff/trade war program was ill thought out by the president and his “I hire the best people” group of economic advisors. As time progresses, it becomes more and more evident that the current administration is completely incompetent. The following article is from Forbes:

Trump Steel Policy Hits Home in Illinois

Precision metal stamping for auto parts uses steel as a major input.

For a brief period last week, it appeared that Trump administration steel policies might not be as problematic as they first appeared. While 25 percent tariffs came on, officials announced exclusions for allied countries; those seemed to exempt 65 percent of steel imports. Perhaps domestic steel users would not be hurt so badly after all.

This week it became clear they would have no such luck. Even when the steel tariff exclusions were announced, they were declared to be temporary. Then, when it revealed its reworked trade deal with S. Korea, the Trump administration announced:

“Korean imports of steel products into the United States will be subject to a product-specific quota equivalent to 70% of the average annual import volume of such products during the period of 2015-17. This will result in a significant reduction in Korean steel shipments to the United States.”

If tariffs are just to be replaced with quotas, the exclusions will not mean much. It looks like steel prices in the United States will be going up after all.

So what effect will the Trump administration’s protectionist approach to steel have on U.S. industry? It’s clearly beneficial for companies that produce steel. Such companies employed about 140,000 U.S. workers in 2016. In contrast, there were roughly 2,000,000 American jobs in which steel was a significant input in production. Let’s focus on the latter group.

Meet Principal Manufacturing Corporation, a privately-held company that does about $60 million in annual sales and has roughly 350 employees. The company is physically located in Broadview, Illinois, on the western outskirts of Chicago. In a more general sense, though, the company is situated in the middle of a global supply chain.

Using both imported and domestically-produced steel, Principal’s core competency is high-end metal stamping. According to Ed Farrer, Director of Purchasing for Principal, roughly 80 percent of Principal’s output is automotive components. Much of their work is high-precision, with tolerances of 5 microns (that’s 5 millionths of a meter, or 1/5000 of an inch).

That need for precision can determine what kind of steel Principal uses as an input. Farrer explains that there are many different types of steel. Within the United States there is steel from older, integrated mills and there is steel from minimills. “Minimills do make a good product,” Farrer said. “It just cannot be used for every application. (For example,) the surface finish is not as good for hoods and fenders.” There can be issues with thickness control and the ability to meet mechanical property requirements.

The integrated mill product is more refined, but there are important variations in quality there, too. Farrer said that for some of their needs the highest quality steel comes from Japan and Germany. While Principal tries to use domestically-produced steel when it can, it has some customers who will demand the quality of foreign steel inputs.

Principal sells both domestically and abroad. They ship to Canada, Mexico, Korea, China, the Czech Republic, Ireland, and Italy. They also have a lot of customers with headquarters in a foreign country, but production facilities in the United States.

And Principal feels vulnerable to the Trump administration’s moves on steel prices. For the metal stamping products they make, the metal price is between 30 and 70 percent of the selling price, and they have seen metal prices going up, even in anticipation of the tariffs. While the tariffs only apply to imported steel, they allow domestic producers to raise their prices to match.

“What they’ve done is moved steel producers’ pain onto steel fabricators’ pain,” said Farrer. “If we don’t have access to world competitive steel prices, we’re going to lose business opportunities.”

Principal will have no choice but to pass the input price increases on to customers. Their concern is that customers will then choose to source their parts elsewhere in the world. Even if President Trump’s steel tariffs prove temporary – and the administration has not given any indication that they are – such price hikes can have long-lasting effects. Farrer notes that it is not a simple thing for an auto manufacturer to switch suppliers. There is an elaborate “production part approval process.” But a price spike is the sort of thing that could prompt a buyer to start looking abroad for competition.

“It’s another business challenge that we don’t need,” said Farrer. “Business is tough enough today.”

What of the national security argument that President Trump has used to justify this protection? Farrer sees irony. “This is for national defense? We’ll have plenty of steel for national defense, but we won’t have anyone to fabricate a component.”

     Thread Starter

3/31/2018 8:23 am  #3

Re: America First ! ! ! Well, kinda

Team Trump


We live in a time in which decent and otherwise sensible people are surrendering too easily to the hectoring of morons or extremists. 

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