According to Ford’s CEO, Trump’s Tariffs on Metals Costs Ford $1 Billion.
> “From Ford’s perspective the metals tariffs took about $1 billion in profit from us,” CEO James Hackett said at a Bloomberg conference in New York, “The irony of which is we source most of that in the U.S. today anyway. If it goes on any longer, it will do more damage.” He did not specify what period the $1 billion covered.
It’s reasonable to assume GM is in a similar boat.
Steelworkers Demand Higher Pay as Tariffs Lift Profits
The Wall Street Journal reports Steelworkers Demand Higher Pay as Tariffs Lift Profits.
The steel workers did not benefit. They have authorized a strike demanding higher wages as the price of steel rose 30%.
> Leaders for some 30,000 members of the United Steelworkers union say United States Steel Corp. and ArcelorMittal SA aren’t passing those benefits to their workers, who have gone without raises in recent years even as wages have started to climb more broadly.
Trump Picking Winners
Given there are vastly more users of steel than producers of steel, Trump’s ploy was a piss-poor tradeoff. Any gain to the steel industry is a loss by Ford, GM, and all the other users of steel and aluminum.
Ford ate the cost as did GM, but any ability of the steel producers to hike wages is more than offset by lost profits and less opportunity for manufacturers who use steel to hike wages.
Some small- and medium-sized manufacturers who use steel as an input will undoubtedly go out of business. Consumers will pay more for products.
It is idiotic to see any “win” in this other than for a small number of producers at a huge cost everywhere else.
Mike “Mish” Shedlock
Ford has every incentive to exaggerate their losses from the tariffs. We import maybe 5% of our steel from China and there are always ways to work around tariffs. Instead of going directly from China, go to Canada and then Canada to the US. Etc… .
Mish,
Think about it as accelerating the increase of the fuel economy of vehicles.
I thought you wanted to protect the environment? What gives?
The Center for Automotive Research (CAR), in a recent 2017 report, estimated that the increased use of high strength steels (HSS) is expected to peak at around 15 % of total vehicle weight composition by 2020, before gradually falling to roughly 5 % by 2040 as other lightweight materials gain ground. At the same time, mild steel content will fall from historic highs of 55 % of vehicle weight to about 5 %. In terms of lighter materials, UHSS steel and aluminium use will grow steadily, especially in safety-cage parts and components (e.g. frames and rails). The use of third generation steels with better formability properties will grow significantly. Use of magnesium will also grow, particularly in applications such as instrument panel crossbeams. The use of carbon fibre reinforced polymer (CFRP) will grow slowly with most applications in reinforcements rather than panels. CAR predicts that by 2030, 96 % of vehicle programs will consider aluminium for body-in-white applications.
What makes you think manufacturers who use steel will hike wages instead of increase profits?
Seriously though, I agree Trump is effectively picking winners, but that is what government does in almost every action it takes. Whether it is bailing out the bankers, banning short selling, handing money to defense contractors, exchanging public union contracts for political donations, how it taxes private equity carried interests, allowing mass illegal immigration to hold down wages on low skill jobs, building a road here instead of over there, and on and on. The difference here is that the “winners” Trump is picking haven’t been picked in a very long time. Too much government for too long, in too many areas of our lives, is why we are getting this backlash and a new set of “winners.”
“What makes you think manufacturers who use steel will hike wages instead of increase profits?”
Um, I’m not sure you said what you meant here. Manufacturers who use steel, or at least, who use it for manufacturing within the US, are facing losses, not gains. As I see it, they have four choices:
They probably can’t do #1 due to labor agreements. They probaby can’t do #2 if they compete with imports. That leaves them with some combination of 3 and 4.
No, I meant what I said as a tongue-in-cheek joke to a reply Mish made to my comment yesterday. You need to see my comment and Mish’s reply from the earlier “Think Imports and Trade Deficits Impact GDP” post under Realist’s original comment. For those not familiar with those comments, I guess I should have stated “What makes you think manufactures who use steel will hike wages instead of increase profits without the tariffs?”
We need more cheap steel from China? Aren’t new steel plants opening in the US? why do some people hate the American worker and wants there jobs to be outsourced to another country?
Good lord, can you name even 1 person who says they WANT jobs to be outsourced? And yes, we do need the cheapest highest quality steel from wherever we can get it.
Let’s under pay workers to have the cheapest steel prices. This is how outsourcing happens.
The tariff on steel raises steel prices in the US, but not in China. Therefore, manufacturers have a new incentive to move production to China. Now, in addition to saving on labor, they can save on steel prices as well.