EuroWire May 2018

Transatlantic cable

† Over the long haul, Ms Sheth acknowledged, tariffs – not excluding those announced by President Trump in March – may hurt the industries they are intended to prop up.

She said: “If the point is to protect American jobs, if the point is to protect small and medium-sized businesses, this is exactly the wrong way to do things.” That view is supported by the numbers. The mills and smelters that supply raw material, and that stand to benefit from the tariffs, have been shrinking for years. Today, those USA industries employ fewer than 200,000 people. In contrast, according to a Heritage Foundation analysis of Commerce Department data, cited by the Times , the companies that buy steel and aluminium employ more than 6.5 million workers. One of those companies is Insteel Industries (Mount Airy, North Carolina), which operates ten plants from Arizona to Pennsylvania producing steel wire products for concrete reinforcing. It employs 1,000 workers, most without college degrees. “The jobs that we have are good jobs,” said Insteel’s chairman and CEO H O Woltz III. “Our guys make a lot of money.” Mr Woltz pays around $20 an hour on average, and he has been able to increase his payroll despite stiff competition from abroad. But now his business calculus is being upended, according to the Times reporters, who wrote: “It is people like H O Woltz III who feel most vulnerable.” The feeling is warranted. Mr Woltz buys most of his raw material from domestic mills, but he expects them to raise prices as their foreign competitors are hit by the tariffs. He fears that, if he has to raise his prices to commercial builders, he will lose business to rivals paying much less for their raw materials. Said Mr Woltz: “If the customers have the option of purchasing from Malaysians or Colombians, who don’t have to pay that extra cost, that’s what they are going to do.” Right now, Mr Woltz pays around $600 per ton of steel wire rod. The impact of a 25 per cent tariff would add $150 to that price. Currently he makes $40 profit per ton on sales. Noted Ms Kitroef and Ms Swanson: “The math would destroy his balance sheet.” ‘We are steel workers, too’ A smaller player further down the supply chain, Mid-South Wire Co (Nashville, Tennessee) is a family business founded by John T Johnson’s father 51 years ago. Its 150 employees all get health insurance and a retirement plan. Many spend their entire working careers at Mid-South, turning hot-rolled wire rod into such products as bucket handles, dishwasher racks and shopping carts. The experience of having lost many customers to lower-cost Chinese manufacturers taught the younger Mr Johnson that his hold on his market is only as secure as his price advantage, now under threat by the Trump tariffs. If his sales are badly hurt by the tariffs, the company will be compelled to let employees go. As he expressed it to the Times reporters, to Mr Johnson it feels as if the administration cares only about the people melting and hot-rolling steel – not those turning that material into racks at a hardware store or the products sitting on them. “We are steel workers, too,” he said. “Our jobs and our livelihood are centred around steel just as much as the steel mills.” † Time will tell whether employers like these wiremakers will cut jobs because of the tariffs. Economic growth remains strong, and the recently enacted corporate tax cut will give USA companies more cash to work with. “We think the dial won’t move that much,” Atsi Sheth, an economist at Moody’s Investors Service, told the Times . “You are likely to gain jobs in a few sectors, but lose them in others.” Even so, the prospect of retaliation from trading partners, and an ensuing trade war, should stir memories of President George W Bush’s ill-fated tariffs of up to 30 per cent on steel imports in 2002. One study of the results found that higher steel prices cost more jobs than the number of people employed in the industry at the time.

Energy

Suspicions become reality as USA officials confirm Russian cyberattacks on vital USA infrastructure

The reporting by Bloomberg News was stark: “Russian hackers are conducting a broad assault on the US electric grid, water processing plants, air transportation facilities and other targets in rolling attacks on some of the country’s most sensitive infrastructure, US government officials said 15 th March.” The announcement by the Department of Homeland Security (DHS), in conjunction with the Federal Bureau of Investigation (FBI), was the first official notice that Russian hackers have taken aim at facilities on which hundreds of millions of Americans depend for basic services. But it did not come as a surprise. Last July, it was reported that Russian hackers had breached more than a dozen power plants in seven states; according to a Bloomberg source, this aggressive campaign has since expanded to dozens of states. The DHS alert declared that, since at least March 2016, “Russian government cyber actors” have targeted US “government entities and multiple critical infrastructure sectors.” It further asserted that vital manufacturing sectors and commercial facilities also had been targeted by the ongoing “multi-stage intrusion campaign by Russian government cyber actors.” USA Energy Secretary Rick Perry told lawmakers during a 15 th March hearing: “The warfare that goes on in cyberspace is real.” Cyber attacks, he warned, “are literally happening hundreds of thousands of times a day.” Fears for the USA electric grid Bloomberg reporters Jennifer A Dlouhy and Michael Riley summarised the findings of a joint DHS/FBI analysis that described the hackers as extremely sophisticated. In some cases they first breached suppliers and third-party vendors before “hopping from those networks” to their ultimate target. The DHS did not say whether these attacks were successful. According to the alert, the Russian hackers “targeted small commercial facilities’ networks.” As reported by Ms Dlouhy and Mr Riley, the attackers typically took a three-pronged approach: • They selected targets and methodically went after initial victims as a way to reach their ultimate prizes, including industrial control systems used by power plants and other infrastructure • Tactics included sending spear-phishing emails and embedding malicious content on informational websites to obtain security credentials that could then be exploited for more information and access • Once they obtained access, the attackers “conducted network reconnaissance,” and moved within the systems to collect information on industrial control systems. (“Russian Hackers Attacking US Power Grid and Aviation, FBI Warns,” 15 th March) † US intelligence officials have long been concerned about the security of the country’s electrical grid. As noted by the Bloomberg reporters: “The recent attacks, striking almost simultaneously at multiple locations, are testing the

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May 2018