 |
| Photo: internet |
Trump’s decision to impose tariffs on steel and aluminium imports to the US is designed to show that he is a no nonsense, tough talking, straight from the hip type of guy. What they actually show is that he doesn’t understand basic elements of the US economy. Initially, he imposed the tariffs on Canada and Mexico, the main suppliers of steel imports and he has now extended them to the European Union.
His argument is basically that these imports undercut US jobs, weaken the US economy and are somehow unfair, that is more unfair than the so-called free market is supposed to be. Declining consumption of domestically produced steel and aluminium is blamed on cheap, or at least cheaper imports. But it is not true.
First, let’s look at the steel market. It is dominated by China. In 2023, global production of steel amounted to 1,892.2 million tonnes[1] and of that China represented 1,109.1 million tonnes compared to the US in 4th place with just 81.4 million tonnes. However, China is not to blame for any of the travails of the US steel industry. It uses 96% of all its steel for its own internal consumption. Neither are Mexico and Canada to blame. In 1995, a year after the North American Free Trade Agreement with Mexico and Canada came into effect, due to entirely unrelated reasons (someone needs to explain it to Trump) world production jumped from 753 million tonnes to double that in 2011 and now to the current figure of 1,892.2 million tonnes.
US production did not rise at the same rate, because most of this rise was due to countries, like China and India using their own steel to industrialise. Nor did US imports rise by the same amount either. In 2000, the USA had net imports (imports less exports) of 28.6 million tonnes which had fallen to 17.6 million tonnes in 2023. Its apparent consumption has remained relatively stable too, fluctuating between 98.2 million tonnes in 1995 and 90.5 in 2023. It is not the case that imports are undermining US steel, but that the steel industry has changed significantly and in 2023, global exports of steel accounted for 24.7% of all steel production, with US imports behaving in a similar manner. The amount of steel imported is around the same average as global exports in percentage terms.
Both Canada and Mexico have also increased production and imports. It is just not the case that they are flooding the US market, in fact no one is. US steel consumes more than it can produce and the fall in employment in the sector is due to technological changes and reorganisation of the sector by the major companies. In the golden era of US steel, in 1975 there were 457,000 employees in direct manufacturing, which had fallen to 171,000 in 1995 and 141,000 by 2001. The large reductions in the workforce all occurred before the free trade agreement.
Both Canada and Mexico have also increased their consumption in this period, but don’t export nearly as much as Trump would like to imagine with Canada exporting around 6 million tonnes.
With aluminium, the US is one of the major consumers in the world and does produce it, but it barely registers as a major producer of bauxite the principal mineral it is made from, the largest mining nation in Latin America being Brazil with a production of 31 million tonnes. The US is the largest importer nation in the world, ahead of the Netherlands and Germany. It has no option but to import and most of the aluminium it imports does come from Canada and tariffs are not going to change that one iota as there is no alternative source for the US. They could import from Europe or Brazil but they are hit by tariffs too.
On the one hand US dependency on steel imports undermining the local market is simply not true and in the case of aluminium and its raw material bauxite, there is little the US can do about it as it couldn’t possibly meet demand without imports. This is little more than Trump posturing to his base on an issue that will produce no positive results for the country. Those that export steel will simply redirect their supplies elsewhere, there is enough of a market for it. And in the grand scheme of things, it is not that much considering the scale of global production, and the US needs aluminium and it needs bauxite, otherwise no guzzling cans of coke or whatever is the popular poison now, though they could always switch to plastic which brings its own problems.
Trump will achieve little with this. Though it may be what he considers a safe bet to test the waters on and also make Europe jittery. It will take time for the worst effects to trickle down to his supporters, but the agricultural tariffs will hit them in their pockets immediately. The tariffs will be paid by his poor supporters and his trade war despite his populist rhetoric will take him nowhere. He may eventually have to backtrack on this.
[1] International steel statistics taken from unless otherwise stated.
His argument is basically that these imports undercut US jobs, weaken the US economy and are somehow unfair, that is more unfair than the so-called free market is supposed to be. Declining consumption of domestically produced steel and aluminium is blamed on cheap, or at least cheaper imports. But it is not true.
First, let’s look at the steel market. It is dominated by China. In 2023, global production of steel amounted to 1,892.2 million tonnes[1] and of that China represented 1,109.1 million tonnes compared to the US in 4th place with just 81.4 million tonnes. However, China is not to blame for any of the travails of the US steel industry. It uses 96% of all its steel for its own internal consumption. Neither are Mexico and Canada to blame. In 1995, a year after the North American Free Trade Agreement with Mexico and Canada came into effect, due to entirely unrelated reasons (someone needs to explain it to Trump) world production jumped from 753 million tonnes to double that in 2011 and now to the current figure of 1,892.2 million tonnes.
US production did not rise at the same rate, because most of this rise was due to countries, like China and India using their own steel to industrialise. Nor did US imports rise by the same amount either. In 2000, the USA had net imports (imports less exports) of 28.6 million tonnes which had fallen to 17.6 million tonnes in 2023. Its apparent consumption has remained relatively stable too, fluctuating between 98.2 million tonnes in 1995 and 90.5 in 2023. It is not the case that imports are undermining US steel, but that the steel industry has changed significantly and in 2023, global exports of steel accounted for 24.7% of all steel production, with US imports behaving in a similar manner. The amount of steel imported is around the same average as global exports in percentage terms.
Both Canada and Mexico have also increased production and imports. It is just not the case that they are flooding the US market, in fact no one is. US steel consumes more than it can produce and the fall in employment in the sector is due to technological changes and reorganisation of the sector by the major companies. In the golden era of US steel, in 1975 there were 457,000 employees in direct manufacturing, which had fallen to 171,000 in 1995 and 141,000 by 2001. The large reductions in the workforce all occurred before the free trade agreement.
Both Canada and Mexico have also increased their consumption in this period, but don’t export nearly as much as Trump would like to imagine with Canada exporting around 6 million tonnes.
With aluminium, the US is one of the major consumers in the world and does produce it, but it barely registers as a major producer of bauxite the principal mineral it is made from, the largest mining nation in Latin America being Brazil with a production of 31 million tonnes. The US is the largest importer nation in the world, ahead of the Netherlands and Germany. It has no option but to import and most of the aluminium it imports does come from Canada and tariffs are not going to change that one iota as there is no alternative source for the US. They could import from Europe or Brazil but they are hit by tariffs too.
On the one hand US dependency on steel imports undermining the local market is simply not true and in the case of aluminium and its raw material bauxite, there is little the US can do about it as it couldn’t possibly meet demand without imports. This is little more than Trump posturing to his base on an issue that will produce no positive results for the country. Those that export steel will simply redirect their supplies elsewhere, there is enough of a market for it. And in the grand scheme of things, it is not that much considering the scale of global production, and the US needs aluminium and it needs bauxite, otherwise no guzzling cans of coke or whatever is the popular poison now, though they could always switch to plastic which brings its own problems.
Trump will achieve little with this. Though it may be what he considers a safe bet to test the waters on and also make Europe jittery. It will take time for the worst effects to trickle down to his supporters, but the agricultural tariffs will hit them in their pockets immediately. The tariffs will be paid by his poor supporters and his trade war despite his populist rhetoric will take him nowhere. He may eventually have to backtrack on this.
[1] International steel statistics taken from unless otherwise stated.
⏩ Gearóid Ó Loingsigh is a political and human rights activist with extensive experience in Latin America.
I do enjoy Gearoid's pieces but yet again I'm compelled to say that Trump's public pronunciations are for domestic (read his voter base) consumption. That's not to say he wouldn't go through with some, but his whole reason for living is "The Deal". He wants his mark to be undeniable in History writ large.
ReplyDeleteAn interesting point made on social media recently was that since the creation of DOGE nobody seems to know who the head of the Democrat party is. Make of that what you will.
Joe Biden thinks it is him and that he is still President
Deleteeven with that Steve, the point in the article seems simple: the need for steel in the US cannot be produced in the US.
DeleteCountries that produce steel for export do not need the US to buy their product.
Countries that cannot trade take a hit.
Trump will either have to change direction or take a hit.
But already it seems that the dysfunction that characterised Trump 1 is now setting into Trump 2.
Yep, and he'll backflip when they work that out.
DeleteI actually felt sorry for Biden in the end, as a human not what he did. Quite obvious he was in mental decline yet the democrats lied out their arses saying he was fine.
Biden is the president I abhor most. It is because of his role in the genocide. He was not so senile that he did not know what he was doing.
DeleteYet you are absolutely right about the Democrats. I think the success of Trump lies in the implausibility of the Democrats as an alternative to him.
Nixon in deliberately prolonging the Vietnam War from 1968 to 1972 when there was the chance of an end in 68 deserves the worst President accolade. But Trump in siding with Putin in Ukraine will excel that.
ReplyDeletePigs from the same sow, Barry. What makes it visceral in the case of Biden Nixon is much harder to remember and many that do were teens at the time. Here we have lived through a genocide broadcast live while genocide Joe armed it. Biden is top of the worst ever list for me while Nixon is a close second. Even if Trump sides with Putin it is hard to see Putin as being as bad as Netanyahu. Both conduct their business like Nazis but the focussed mass murder of thousands of children merits the hottest place in any hell we might wish to imagine.
DeleteThe impact on the stockmarket has given the advantage to those in "the know" who can buy stocks knowing they will rebound. Elbows Up
ReplyDelete