Metal Tariffs Could Bolster American Steel and Aluminum Manufacturers

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    The United States Commerce Department recently recommended that President Trump place tariffs on steel and aluminum imports. The recommendation to place tariffs, or otherwise restrict imports, was made as a result of a Commerce Department review to determine whether or not the imports were reducing American national security. Commerce determined that the imports were hurting American steel and aluminum producers which did limit American national security as the companies may not be able to produce the amount of metals needing in the event of a national emergency.

    The Commerce Department recommended that the President reduce imports through tariffs or quotas to reduce imported steel to about 60% of the total imported in 2017 and to reduce imported aluminum to about 85% of the 2017 total. If the President makes a move to reduce the importation of these metals, it should work to improve the market for struggling American metal manufacturers. In fact, a reduction in imports may cause recently closed steel and aluminum factories to be reopened. However, the many factories that have been shuttered for years will likely remain closed as it would likely be too costly to repair the old facility and to bring them back into production.

    Metal tariffs would have an impact on more than just American metal manufacturers. Tariffs would result in higher metal prices that may negatively impact metal consuming companies. Higher steel prices may negatively impact automobile manufacturers, appliance manufacturers and the energy industry. Higher aluminum prices may dampen the profitability of manufacturers of airplanes and consumer electronics. In addition, any trading partner that lost business due to the tariffs would be likely to retaliate. The countries that export the most steel and aluminum to the United States include China, Brazil, Russia and Venezuela.

    The US metal industry has been in steep decline over the past 50 years. The once thriving manufacturing industry in the Northern and Midwestern United States has almost vanished. There currently fewer than 10 operating integrated steel mills in the UX. At one time, steel mills dominated the landscape from New York to Pittsburgh to the Great Lakes. Aluminum production peaked more recently than steel, but the decline has been just as swift. The number of aluminum manufacturers in the United States has fallen from 23 to 8 in the last 18 years.

    The largest steel manufacturers in the US are Nucor, US Steel and Steel Dynamics. The largest aluminum manufacturers in the US are Alcoa and Century Aluminum. All five companies are publicly traded.

     

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