EuroWire May 2018

Transatlantic Cable

Alex Griffiths, an analyst with the consultancy Wood Mackenzie, thinks this probable. As he told the Financial Times : “The UK supplies high value-added steels to the USA — steels that, in the short term, US users will struggle to source domestically.” † British Steel – the largest steel producer in Europe and one of the top ten exporters in the UK – responded to the Trump tariffs with “disappointment.” But the company also observed that American sales account for only a small percentage of its exports. Insteel and Mid-South Wire are among hundreds of specialised USA wire businesses expecting to be hurt by the steel tariffs “As industrial America sorts out the tariffs’ prospective impact, one thing is clear: the divide between the metal producers and their customers slices directly through Mr Trump’s blue-collar constituency.” The reference is, of course, to President Donald Trump’s announcement in the spring of plans to impose steep tariffs on imported steel (25 per cent) and aluminium (10 per cent). And Natalie Kitroef and Ana Swanson of the New York Times had identified an anomaly at the heart of Mr Trump’s jobs-centred initiative. (“Trump’s Tariff Plan Leaves Blue-Collar Winners and Losers,” 3 rd March) Representative of the winners is Michael A Bless, the president of Chicago-based Century Aluminum, who greeted news of the tariffs with jubilance. “Enthusiastic and gratified are probably understatements,” he told the Times . Mr Bless believes that the tariff on aluminium would allow him to restart some production of high-purity aluminium for military use at Century’s plant in Hawesville, Kentucky, in partial shutdown for three years now. He said he plans to invest more than $100 million in the smelting operation and to add 300 hires to his 1,850-strong workforce this year. “These are jobs that are sorely needed,” said Mr Bless. Labour unions are in firm agreement. Leo W Gerard, the president of the United Steelworkers union, which also represents aluminium workers, said his members were tired of enduring layoffs because of an onslaught of artificially cheap steel and aluminium produced by “cheaters” in China. The upending of a business calculus But Monica de Bolle, an economist at the Peterson Institute for International Economics, a private and non-profit Washington-based think tank, asserted that Mr Trump’s “America first” thinking is producing more losers than winners.

Steel

Their high exports to the USA may cushion British steel companies from the impact of the Trump steel tariffs

The Financial Times (London) has reported that Britain’s steel sector is alarmed about the potential consequences of USA trade tariffs announced on 8 th March by President Donald Trump, who invoked national security as the justification for import duties of 25 per cent on steel and 10 per cent on aluminium. With exemptions only for Canada and Mexico – signatories, with the USA, to the North American Free Trade Agreement (NAFTA) – the tariffs were to take effect promptly, despite immediate and widespread negative reaction. Gareth Stace, director of the UK Steel lobby, said that such tariffs would, if implemented, “have a profound and detrimental impact on the UK steel sector.” (“UK Steel Industry Recovery at Risk from Trump Trade Tariffs,” 9 th March) Liam Fox, the British trade secretary, was said to be planning to put the case for a UK exemption from the proposed tariffs on an upcoming visit to Washington. But the Financial Times noted that Britain’s membership of the European Union precludes its striking unilateral trade deals; and it was confirmed by Downing Street that Mr Fox’s representations would be within the EU framework. For its part, on 10 th March the European Union, together with Japan, pressed USA trade representative Robert Lighthizer for exemptions from the tariffs. But the Associated Press reported that the longtime USA allies appeared to win no quick concessions. Cecilia Malmström, the EU trade commissioner, said after meetings in Brussels that she got “no immediate clarity on the exact USA procedure for exemption,” but that further talks were planned. Ms Malmström had said earlier that the bloc was ready to retaliate if Europe were to be targeted by the Trump measures. Industry observers told Financial Times reporters Michael Pooler and George Parker that steelmakers across Europe are concerned that steel shipments once destined for the USA will end up on the continent instead, and drive down prices. † With reference to the UK specifically, the reporters noted that only some seven per cent of UK steel output, or 350,000 metric tons (mt), was exported to the USA last year. Analysts point out that Britain tends to export to the USA high-value and speciality steels, as distinguished from commodity products that are more readily substitutable. Finding themselves without alternatives, American customers of the UK steel producers might be willing to absorb the cost of the tariffs.

Image: www.bigstockphoto.com Photographer Adrian Grosu

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May 2018