Update - The Impact of Tariffs on Springmakers

On May 7, I interviewed Philip K. Bell, president of the Steel Manufacturers Association, about the impact of U.S. tariffs on steel-dependent manufacturing industries, including springmaking.

Tariffs
Bell explained that Canada and Mexico are the two largest steel trading partners, with most U.S. steel exports going to those countries. However, the impact of tariffs on North American imports and exports is nothing new. They are covered by provisions in section 232 tariffs enacted in 2018 and the U.S.-Mexico-Canada Agreement (USMCA), a trade agreement enacted in 2020 to replace the North American Free Trade Agreement (NAFTA). There is also a 90-day pause on all tariffs in excess of 10% -- except for those on China.

“China has about a 145% tariff on its steel goods. Canada and Mexico had 25% tariffs reinstated (currently 10% for a 90-day period). But keep in mind, any steel products that meet USMCA requirements are not subject to that tariff. So, it's not as dreadful as some people make it out to be,” Bell said. “The USMCA agreement was reached several years ago, which required certain amounts of steel products to be melted and poured within the USMCA region to be tariff-free.”

Dumping
These tariffs and other actions have also helped address issues of dumping and transshipment of steel products into the U.S. at artificially low prices. (Several SMI member companies are currently fighting battles against dumping.) 

“The reason dumping hurts is often steel that is produced in countries that have no free market incentives like we do in the United States. So, the steel is highly subsidized,” Bell explained.  “And then they're selling them sometimes even below the cost of production here in the U.S. And that’s why dumping is so insidious and where we have to fight it every step of the way, whether it's through anti-dumping and countervailing duty cases or through the support we're getting from the administration by closing some of the loopholes on the 232 tariffs.”

Reshoring and New U.S. Steel Plants
The new tariffs have also incentivized foreign steel producers to invest in new manufacturing capacity within the U.S.

“I think the ultimate goal of the administration is to use the tariff policy to get steel products to be produced here in the United States in one of two ways: either foreign direct investment in facilities that employ American workers, pay American taxes, and create American jobs, or through the organic growth of existing companies, expanding their operations,” Bell said.

The steel industry currently has significant unused capacity. U.S. steel production is operating at about 70% of its maximum output. So, there is ample domestic capacity to meet the needs of downstream industries like spring manufacturing, according to Bell.

The Future of Trade
Several events impacting steel and steel products are coming down the pipe. Be on the lookout for the renegotiation of the USMCA trade agreement and the outcome of trade negotiations with China.

An edited transcript of my 30-minute interview with Bell will be available within a few days at https://www.smihq.org/may-tariff-update/

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