Still a trade war: Commerce Secretary Ross Says EU, Canada and Mexico Will Face Steel And Aluminum Tariffs Beginning At Midnight Tonight

[damirUSBiH + 327]

President Trump is imposing steep tariffs on steel and aluminum from three of America's biggest trading partners — Canada, Mexico and the European Union.
The trade penalties, 25% on imported steel and 10% on imported aluminum, take effect at midnight, Commerce Secretary Wilbur Ross told reporters Thursday. Canada, Mexico and the EU had been granted temporary exemptions from those tariffs while the United States pursued negotiations to address the administration's concerns about the state of domestic steel and aluminum production. The negotiations had a Friday deadline.Trump's decision could raise prices for Americans on a range of everyday products. It could also place the United States in a trade dispute on more than one front. The administration is separately moving ahead with tariffs on Chinese goods. No doubt, retaliation will be strong and painful..

[franco + 96]

 

Tariffs on allies but no sanctions on Russia....
 

[Petar + 76]

Protectionism doesn’t work with a global economy in the 21st century...especially when the economy is in good shape. And, more when you have friends as a EU,Can. and Mex.

[jpZelabal + 63]

There goes the stock market.....Again. Making Raw Materials More Expensive Again!

[rainman + 263]

We will see one, if it really happens and two, if it does, how long it will last. I am not sure what he wants to accomplish doing the tarrifs, ruining the international economy?

[Guillaume Albasini + 851]

Europe, Canada and Mexico ready to reply...

https://uk.reuters.com/article/us-usa-trade-eu-explainer/europes-response-to-u-s-import-tariffs-idUKKCN1GS2CH

https://globalnews.ca/news/4243294/justin-trudeau-donald-trump-steel-tariffs/

https://www.sbs.com.au/news/mexico-plans-response-to-us-tariffs

[Pavel + 384]

Great, make U.S. allies mad...

[damirUSBiH + 327]

This is like designating one part of a swimming pool as “no swimming zone”..

[Petar + 76]

6 minutes ago, Guillaume Albasini said:

Europe, Canada and Mexico ready to reply...

https://uk.reuters.com/article/us-usa-trade-eu-explainer/europes-response-to-u-s-import-tariffs-idUKKCN1GS2CH

https://globalnews.ca/news/4243294/justin-trudeau-donald-trump-steel-tariffs/

https://www.sbs.com.au/news/mexico-plans-response-to-us-tariffs

Expected. And I believe the "answer" will cost consumers and workers in the US.

[Guillaume Albasini + 851]

It's easiers to start a trade war than to stop it.

Interestingly Mexico plan to pinpoint sanctions on the states needed by Trump for reelection...

A top Mexican strategist said such tariffs could target exports from states that voted for Mr Trump in 2016, and which he would need to win to secure re-election in 2020. "The key is to get down to details on what's going to affect Michigan, what's going to affect Wisconsin, what is Ohio going to do, how will Iowa or Nebraska react," Moises Kalach, the head of the strategic council for international business at Mexico's Business Coordinating Council, said.

[Seleskya + 50]

and looks like the Republican party didn't even see it coming. There will be retaliation, but this is also probably partly about Iran sanctions. 

[Jan van Eck + 7,558]

There are some interesting ramifications to this.  Imposing a 25% tariff on Canadian steel will have a targeted impact on the two remaining steel mills at Hamilton, Ontario  (other mills are the Algoma Steel operation in Ontario, opposite the Soo, or Mackinac Straits at the northern tip of Michigan) and the mill at Sorel, Quebec, on the St. Lawrence River between Montreal and Quebec City).  The Hamilton mills produce easily 25% if not 50% of Canadian steel.  All the Hamilton mills went through bankruptcy some years ago, and Stelco Works ended up bought out of bankruptcy by the United States Steel Company. So you have these tariffs directly hurting a US steel processor. 

Will the tariffs shut down Hamilton?  Probably.  I don't think those mills can run over break-even if you remove the export volume, and you cannot sell into the US market with that 25% tariff penalty.  It could be possible if the Canadian Dollar devalued to the point that the exchange rate paid the bulk of the difference.  I don't know where that would be but it could lie at 55 cents. That is a big hit for Canada to absorb (although it would provide a nice cushion for the sale of Alberta oil-sands heavy oils). 

The other problem for Canada is that historically their sheet and galvanized rolls went into the domestic auto industry, and big chunks of that business are gone. The Big Three used to have assembly plants in Canada, back when there was a Canadian duty on US autos (I think around 15%)and the importation of private used cars was totally prohibited. The prohibition was pushed in place by the Canadian auto dealers to keep Canadians from going down to Florida and Arizona and buying used cars with no road-salt exposure, then importing them and spurning the used car lots in Canada. It also forced purchase of new cars directly made in the Canadian plants. 

Yet, with the scrapping of the giant GM plant at Ste.Therese, Quebec,  and the shutdown of the Ford and Chrysler assembly plants, production in Canada is by the Japanese brands,formerly imports.  Canadian auto labor has gotten very expensive, yet Japanese labor is even more expensive,although now everyone is headed for the non-union US South and Mexico. And big chunks of the parts business including engine casting and assembly have settled in low-cost Mexico. 

Canadian aluminum had a home in the engine casting plants, but now that is going to get whittled away and the Pittsburgh-based Alcoa will displace production previously sourced from nine good-sized aluminum reduction plants in Canada, eight in Quebec and one in British Columbia (all located there due to cheap hydropower).  But the production scale of Canada is totally dwarfed by the absolutely staggering over-capacity in China, where there are some 141 aluminum smelters, with a staggering 40 with capacity over 300,000 tons  (some over one million tons) and 97 over 100,000 tons.  [Do you see the problem?]  China central planners decided to own the world aluminum industry, and they do. 

Canada has little leverage, notwithstanding the bluster of Cynthia Freeland. In theory, Canada could go back to a broad-based tariff of 17-1/2% on everything imported, and revert to the "branch-plant economy" they had decades ago, before NAFTA.  Would that work?  It might.  But their production will always be higher-cost, both due to shorter production runs and the squeeze caused by the vast civil service that Canadians have come to love (and loathe), which is very very expensive and requires a high tax level to sustain.  And that, in turn, drives up their manufacturing costs and pricing. 

Conclusion: does Trump "win"?  Short answer: on balance, yes  (if he includes China). 

Edited May 31, 2018 by Jan van Eck
spelling error

[Guillaume Albasini + 851]

The Make America Left Alone policy seems to be working....

Now Europe and China common interests are growing thanks to Mr. Trump

On the Paris Treaty, Europe and China are on the same side... against the US

On the JCPOA (Iran Deal) Europe and China are on the same side... against the US

On aluminium and steel tariffs Europe and China are on the same side... against the US

[Guillaume Albasini + 851]

Steel and aluminium tariffs are already starting to backfire...

 

A number of firms that manufacture products using the metals told The Wall Street Journal that the tariffs have led to higher material prices, forcing them to charge customers more for their products.

As a result, the companies told the Journal that some customers have chosen to take their business to foreign suppliers that use cheaper materials that eschew tariffs.

The tariffs, originally announced in March and put into place Friday, have benefited U.S. steel manufacturers. But the firms that rely on steel and aluminum to make various products are concerned that higher prices will continue to drive their customers to do business abroad.

http://thehill.com/policy/finance/390405-some-us-companies-say-trumps-steel-tariffs-are-already-hurting-their-business

[Boat + 1,324]

In a fair world wouldn't nation's at least have a path with benchmarks that work towards a balance of trade? Leaders should be judged by the ability to not only make balanced trade possible but as normal operating procedure.

[Stephen T. Harris, CPL + 23]

I have to side with POTUs, et al as in my lifetime, I have witnessed dozens of steel manufactures, not fabricators, simply go out of business due to cheap foreign "competition" that is usually state subsidized. Why would any country subsidize their steel making processes? Simple, national security and economic gain. There is the Jones Act, which protects American shipbuilders, which has not done much over the decades, but at least it is there. Black Flag and Liberian type origins for cheaper costs has significant negative economic and national security concerns. Another example is due to onerous eco rules this country has almost no Rare Earth Mining occurring, thereby surrendering the manufacture of dozens of vital minerals to China mostly, who has almost no eco protections for their citizens and workers.  Such REM are critical for everything from cell phones to satellites, and in fact, every ridiculous Prius has 32 lbs of REM and none of such comes from America, but almost all from a country that has the largest standing army in the world that are all trained to kill Americans (China). We have plenty of capable mines, but zero ability to commercially produce. Think there is a pattern here?

[Stephen T. Harris, CPL + 23]

I believe all of GA's posts above are off the topic. He has used articles that, liberal views as they are, simply do not address the making of steel and aluminum, but the fabrication of diverse products made from steel and aluminum. That is the trope that Anti-Trump on everything hecklers use to malign his trade policy, but does not go to the actual reason for the tariffs. If GA can focus on actual steel and aluminum production, which in the oil industry, there is maybe one left for making tubulars, then that would be more productive. If a price of a can for soda goes up by half a penny, so what? If our steel industry actually becomes a real industry again, then that is yuge!!! If you cannot make your own steel, you are doing a disservice to future generations and your national security. This is really not rocket science and using progressive hate Trump articles, including some in the WSJ, does not contribute to understanding the issues.

[Guillaume Albasini + 851]

3 hours ago, Stephen T. Harris, CPL said:

I believe all of GA's posts above are off the topic. He has used articles that, liberal views as they are, simply do not address the making of steel and aluminum, but the fabrication of diverse products made from steel and aluminum. That is the trope that Anti-Trump on everything hecklers use to malign his trade policy, but does not go to the actual reason for the tariffs. If GA can focus on actual steel and aluminum production, which in the oil industry, there is maybe one left for making tubulars, then that would be more productive. If a price of a can for soda goes up by half a penny, so what? If our steel industry actually becomes a real industry again, then that is yuge!!! If you cannot make your own steel, you are doing a disservice to future generations and your national security. This is really not rocket science and using progressive hate Trump articles, including some in the WSJ, does not contribute to understanding the issues.

You want me to focus only on actual steel and aluminium production . I understand that the tariffs are meant to protect the US steel and aluminium industry but you can't just focus on that and forget to take into account all the collateral effects.

As stated by Andy Home, a Reuters columnist and industrial metals analyst, tariffs are missing the target and causing collateral damage

https://www.businesstimes.com.sg/energy-commodities/us-aluminium-tariffs-collateral-damage-and-a-missed-target

By imposing the tariffs you are  helping the steel and aluminium industry with one hand but hurting other US industries with the other hand.

Let's take for instance the oil and gas industry.  As you know the shale industry is facing some bottlenecks related to a lack of pipeline capacity. So they need to build more pipelines needing a huge amount of steel. As steel accounts for 10-20% of the overall oilfield cost structure a 25% tariff could increase the cost by between 2,5% and 5%. Not a good news for the already heavily indebted oil producers.

The following statement is not from an anti-Trump liberal media. It's from the Texas Alliance of Energy Producers :

"Steel is a primary input in the development of oil and gas production in Texas in terms of drilling, ongoing production, and delivery to market. Depending on location, intra-company economics, and other factors, steel typically accounts for 10-20% of the overall oilfield cost structure. As such, the imposition of tariffs and the potential imposition of quotas by agreement or fiat and the resulting steel cost increases is of great concern to TAEP, our member companies, and Texas and US domestic oil and gas producers.

Clearly the tariffs themselves will lead to cost increases for oilfield steel, Oil Country Tubular Goods (OCTG) and line pipe (LP) in particular. Beyond that, shortages of oilfield steel products will develop – and are already developing – further driving up costs to oil and gas producers. A sizable number of products are simply not available domestically, OCTG in particular, and costs have already risen significantly and will likely continue to do so."

Imports can't be replaced overnight by american steel and aluminium as some special products are not available locally and opening new smelters takes time.  And is it really a good idea to increase the production as the steel and aluminium markets are already in oversupply worldwide ?

And by the way do you think it's really usefull to infuriate the EU  with this tariffs when their share of the US imports is rather small ?

Many people believe that the tariffs are meant to protect the US from being overwhelmed by chinese imports but the tariff will hurt mainly Canada, Brazil and South Korea

[Jouhou + 24]

It's just so dumb. At this point I've just resigned to our date and hope economic retaliation comes swiftly enough so the supporters of this kind of policy can wake up and we can start to recover again asap. Basically I'm just hoping this is quick and painless because a downturn is inevitable.

[Jouhou + 24]

I missed this one. Rare earth ores are radioactive. The regulations aren't that bad with that in mind. I'd much rather China exposed their workers and water to that than us. They sacrifice their health on the cheap, why should we try compete with them in THAT race to the bottom? We still have the world's second largest deposit of rare earth ores, and a mine established. If China cuts us off, we have a plan B ready to go.