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Trump Sees Border Wall As Another Boost For U.S. Steel Industry

Jan 7, 2019
Originally published on January 8, 2019 12:43 pm

As President Trump describes it, a steel wall along the Mexican border isn't just about protecting the country from terrorists and drug dealers. It would also be a boon for big steel, an industry he says is essential for American identity.

"I'll have it done by the United States Steel Corp., by companies in our country that are now powerful, great companies again," he said Friday at the White House. "And they've become powerful over the last two years because of me and because of our trade policies."

Trump has made clear how he reveres the beleaguered steel industry, once saying that without one, "You almost don't have much of a country."

Since taking office, Trump has filled his administration with former steel industry executives and attorneys, such as U.S. Trade Representative Robert Lighthizer. They have made reviving the industry a major priority, by protecting it from what they say are unfair foreign trade practices.

Last year, the administration slapped tariffs on imports of steel and aluminum.

The tariffs have been highly controversial, especially because they were justified on national security grounds. But the biggest source of U.S. steel imports is Canada, a strong American ally.

Despite that, the tariffs have benefited big steel, by raising the price of imports and easing the pressure on domestic companies to keep their prices low.

"Our steel industry is now thriving and getting better every single day and it's jobs, and it's that money pouring into our coffers. It's beautiful," Trump said at a Missouri campaign rally in November 2018.

Trump has claimed — falsely — that seven steel plants are being built as a result of the boon touched off by his trade agenda. But at least one new plant is being built and some others are being upgraded. And profits are up for big companies such as Nucor and U.S. Steel.

"Orders are up. Shipments are up. Hiring is up. Wages are up," says Scott Paul, president of the Alliance for American Manufacturing. "No matter which metric you look at, the steel industry is unquestioningly doing better than it has been for the past couple of years."

But numerous manufacturers have also complained that they're being hurt by higher prices for imported steel and aluminum. That includes companies in key industries such as housing and autos.

"The problem, of course, is that as you lend a hand to particular producers — producers of upstream products like steel — you raise the cost of production for steel-consuming industries and steel-consuming firms," says Dan Ikenson, director of the Cato Institute's Herbert A. Stiefel Center for Trade Policy Studies.

In fact, the number of companies that use steel is much greater than the number of steel-producing firms, he notes.

"If you do the math, it doesn't make a whole lot of sense to go to bat for the steel industry in the first place, because you're really hurting a more significant portion of the economy," Ikenson says.

Manufacturers that are unable to acquire the steel they need from domestic suppliers can ask the Commerce Department for an exemption from the tariffs. But the government has been slow to process the exemptions, and many companies are still waiting to hear about their requests.

Ikenson is also less than impressed with the industry's alleged boom, saying it has a lot to do with broader economic forces.

"The steel industry is a cyclical industry. It ebbs and flows with the economy, and right now the economy is sort of peaked out and perhaps beginning to slow down a little bit. If you look at steel stock indexes, they're about where they were a year ago," he says.

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President Trump's dream of a steel wall along the southern U.S. border is still a long way from reality and may never become one. If it were built, it would be a project of enormous scale and a boon to the American steel industry. President Trump is a fan of Big Steel, and his trade policies have benefited some of the largest steel producers. NPR's Jim Zarroli reports.

JIM ZARROLI, BYLINE: President Trump says one of the advantages of building his border wall would be its impact on U.S. companies that manufacture steel. Here he was Friday at the White House.

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PRESIDENT DONALD TRUMP: And here's the other good thing. I'll have it done by the United States Steel Corporation, by companies in our country that are now powerful, great companies again. And they've become powerful over the last two years because of me and because of our trade policies.

ZARROLI: Trump has spoken for years about the importance of a strong domestic steel industry. He has said that without one, you don't have a country. He has talked about unfair trade practices by other steel-producing countries.

Dan Ikenson, director of trade policy studies at the Cato Institute, says Trump often goes to bat for the American steel industry.

DAN IKENSON: His administration is loaded with former steel executives and former steel trade attorneys. And that was a priority of his to impose duties on steel to help them be able to raise the prices and produce more.

ZARROLI: Trump has sometimes claimed that as a result of his trade policies, seven new steel mills are being built in the United States. That's not true, but there is at least one new plant being built, and some others are being upgraded.

There is little question that because of the tariffs on steel imports that Trump imposed last year, Big Steel companies like Nucor and U.S. Steel have seen their profits rise. Scott Paul heads the Alliance for American Manufacturing.

SCOTT PAUL: No matter which metric you look at, the steel industry is unquestionably doing better than it has been for the past couple of years.

ZARROLI: Because of the tariffs, imported steel is more expensive, and domestic suppliers no longer face much pressure to keep their prices low. But higher prices have also hurt a lot of manufacturers of numerous other products, including many in major industries like autos and housing.

Again, Dan Ikenson.

IKENSON: The problem, of course, is that as you lend a hand to particular producers - producers of upstream products like steel - you raise the costs of production for steel-consuming industries and steel-consuming firms.

ZARROLI: Companies can ask for an exemption from the tariffs, but the Commerce Department has been slow to grant them. Meanwhile, prices continue to creep up.

Steel industry officials acknowledge that some manufacturers are being hurt by price increases, but they say the increases for most are insignificant. Here was U.S. Steel CEO David Burritt in an interview on Fox Business channel last month.

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DAVID BURRITT: If you look at the total increase in that price, it's really not substantial. For an automobile, for example, the average cost of car - $30,000. The steel in that is around a thousand dollars. It's not a big number.

ZARROLI: But President Trump has repeatedly said that steel is at the heart of a robust American economy. It's a view that's not widely shared by economists. They say the benefits of tariffs to steel companies aren't worth the price being paid by other manufacturers. Jim Zarroli, NPR News, New York.

(SOUNDBITE OF MUSIC) Transcript provided by NPR, Copyright NPR.