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Early days of Trump White House already reviewed

Feb 17, 2017 | 12:53 PM | Fastmarkets AMM staff

Tags  steel, aluminum, service centers, 2017, economy, Donald Trump, president, White House American Iron and Steel Institute

Executives, analysts from across the metals industries discussed and debated what the early days of new administration have brought already.

Throughout February, executives and analysts from across the metals industries discussed and debated what the early days of the new administration of President Donald Trump have brought already, and what the outlook may be for coming issues.

The American Iron and Steel Institute (AISI) is pushing for a mosaic of trade, tax and regulatory reforms with the intent of stimulating domestic manufacturing.

AISI’s 2017 federal priorities call for more infrastructure spending and support for energy exploration and pipeline construction, the Washington-based industry association said in its annual public policy agenda announcement Feb. 6.  

In the regulatory bull’s-eye are clean-power initiatives, greenhouse-gas protocols for utilities and automobiles, and workplace safety rules—all of which add too much expense to manufacturing, the steel organization argues.

As usual, AISI’s agenda is heavily weighted toward more aggressive trade enforcement, especially with regard to foreign dumping and subsidization of imports.  

“The United States must press China and other nations to eliminate their steel overcapacity and to end all subsidies and other market-distorting policies that promote steel overcapacity ... and defend aggressively our ability to apply non-market-economy methodology to remedy injurious dumping by China,” AISI wrote.

The institute urges greater transparency and industry participation in duty-evasion investigations by United States Customs and Border Protection. A more open duty-evasion complaint process went into effect in August 2016 as a result of the Enforce and Protect Act of 2015, but domestic participants have been disappointed with its rollout so far.

AISI wants Congress to reduce the corporate income tax to 15 percent or 20 percent, eliminate the corporate alternative minimum tax and allow accelerated depreciation and full expensing of capital expenditures.

The Trump administration now wields fresh political and legal vocabulary on trade, upending established practice in Washington that has held true for decades, attorneys said during a Jan. 31 industry panel at the Tampa Steel Conference.

Standard slogans used to cite “free and fair trade,” but President Trump and his team tout “smart and sensible trade,” said Alan Price, an attorney for Washington-based Wiley Rein LLP, who has counseled steelmakers for decades.

Relevant new vocabulary includes: “America first,” “Buy American, hire American,” “border tax” and “smart trade and sensible trade,” Price said.

“We see a fundamental set of changes,” said Price, who has also represented industries such as aluminum, solar panels, high-tech, low-tech and basic metals in trade disputes. “That vocabulary is entirely different than the vocabulary we’ve heard for the last 25 years, in trade policy.”

Specifically, Price expects to see government and industry potentially dust off old legal instruments on trade, from Section 232 actions to Section 301 actions, he told conference attendees. Many of these trade remedies have been unused since former President Ronald Reagan’s administration, he said.

In Price’s view, the overall goal could be to rebalance the United States’ trade relations with other countries—specifically, Mexico and China—said Price, who has done extensive work on state-subsidized Chinese overcapacity.

The U.S. will finally seek trade actions not just on the micro level, with individual anti-dumping or anti-subsidy cases, but also sweeping action on the macro level, seeking to renegotiate and fundamentally alter longstanding trade relationships, he said.

Section 232 cases involve trade adjustments made for “national security purposes,” while Section 301 cases allow the U.S. Trade Representative to combat “unjustifiable, unreasonable actions” that affect U.S. trade, according to Price.

At least one U.S. steelmaker has already described certain steel imports as a “national security risk”, in an earnings call in January.

At least 26 Section 232 investigations were initiated since the first complaint in 1963, though past presidents mostly concluded that there were no threats to national security. Federal officials mostly imposed a handful of restrictions on oil imports, including from Iran and Libya, under Section 232 laws, according to a 2007 Commerce handbook.

Still, many issues in this unsettling political era aren’t new at all, added Lewis Leibowitz, an attorney who runs an independent, Washington-based law practice.

The steel industry has voiced “constant complaints” since the 1970s, resulting in waves of complaints of “unfair trade” and “spasms” of protectionism, said Leibowitz, who often represents foreign companies in U.S. trade investigations.

“I’ve been doing steel trade law since the 1970s,” Leibowitz said. “I get dizzy because so many of the same issues keep cropping up, time after time.”

Decades ago, when Leibowitz attended college, trade made up 4 percent of U.S. gross domestic product (GDP). Now, it contributes 25 percent of U.S. GDP, he said, characterizing trade as a “critical part of our national life.”

“If we eliminate imports ... we will lose many more jobs than we create,” warned Leibowitz. “The steel industry is not the place to look for new jobs,” he continued, noting that downstream steel-consuming industries employ far more Americans.

Philip K. Bell, whose Steel Manufacturers Association (SMA) membership employs more than 80,000 people, noted that, even with recent market optimism, U.S. steelmakers now still only melt at 70 percent utilization rates.

“There’s a lot that we don’t know. ... The trade landscape is going to become more complicated and even more difficult to navigate,” said Bell, whose member steelmakers have filed numerous trade cases in recent years and decades.

U.S. manufacturing employed 12.34 million people as of Jan. 2017, while primary metal manufacturing employed 375,000 people, according to the latest official Bureau of Labor Statistics data.

For context, construction employs 6.8 million people, while trade, transport and utilities employ 27.44 million people. About 125.73 million people work in service industries, broadly defined, as of Jan. 2017.

U.S. steel associations touted a study in 2016, which pegged the total amount of Chinese steel subsidies in the billions.

“You have a capitalist society competing against a society (China) that has lending, but that does not expect a return on capital, a return of payment,” said Alan Price, an attorney for Washington-based Wiley Rein LLP Price, underscoring fears of a Chinese bubble.


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