Make American Steel Great Again Backfires
Gosh, I want to say “I told You So”.
So I will.
I Told You So!
Trump’s Tariffs Backfire
Trump had a plan to Make America Steel Great Again.
Let’s check in and see how well Trump’s plan worked out for American producer JSW Steel.
JSW Steel Files Lawsuit Against Trump Administration
The irony in this sad story is JSW Steel Praised Trump’s Tariffs.
John Hritz, president and chief executive officer of JSW Steel USA Inc., put on a big smile and a Texas flag pin for his television spot on Fox Business in March 2018. “It’s a special day,” he told his host, then told her again: “It’s a special day.” JSW Steel’s India-based parent company, JSW Group, had announced it would invest $500 million and create 500 jobs at its steel mill in Baytown, Texas. “We’re going to make history,” Hritz said.
Hritz was counting on help from President Trump, who three weeks earlier had announced his intention to impose tariffs of 25% on steel and 10% on aluminum imported to the U.S. The Fox anchor wondered if the import levies might interfere with JSW’s Baytown plan, given that much of the raw steel processed at the mill was imported from India and Mexico. “Absolutely not,” Hritz said. On the tariffs, JSW was “in lockstep with the president and with the administration.”
Not so much anymore. A big piece of the Baytown project has been postponed indefinitely, in part because of Trump’s tariffs. Both Baytown and a sister plant in Ohio, where JSW once planned to invest another $500 million, have been operating at unprofitably low production levels, also owing in part to the tariffs. JSW has sued the administration for refusing to exempt it from paying the levies on the massive slabs of steel the company imports and turns into pipe and other products for industrial use. “It’s the hypocritical nature of these tariffs that’s completely dumbfounding us,” says Parth Jindal, director of JSW Steel USA and managing director of JSW Cement Ltd. in India. “It just doesn’t add up.”
That’s What Sucks
Other steel processors are in a position similar to JSW’s, paying tariffs on raw steel they say they can’t procure here. NLMK, the U.S. arm of Russia’s Novolipetsk Steel PJSC, has had rolling layoffs at a plant in Pennsylvania because it’s been paying tariffs on slab from Russia—$184 million and counting, says Robert Miller, NLMK’s U.S. CEO and president. “That frustrates me because now you’ve affected people’s families,” he says. “We’re an American company with American workers represented by American unions. That’s what sucks.”
Avalanche of 50,000 Petitions
The department was unprepared for the flood of requests it got for exclusions. It had estimated there would be 4,500 petitions for tariff relief. By early 2019 it had more than 50,000 from steel and aluminum makers, as well as from manufacturers of furnaces, razor blades, automobiles, and other metal goods, according to an analysis by the Mercatus Center, a research think tank at George Mason University. As of late January, steel claims alone had risen to more than 141,000, with almost 75,000 granted, 22,000 denied, and 27,000 rejected for filing errors, according to the Commerce Department.
JSW filed six exclusion requests for imports from India in April 2018, followed by another six for Mexican imports that June. JSW told Commerce it couldn’t rely on “direct competitors” in the U.S. to supply its slab. Echoing the department’s 2001 analysis, JSW said that the material it needed simply wasn’t available in the quantities and specifications it required and that, furthermore, competitors had no incentive to sell JSW slab that they could process and sell themselves at a higher markup.
Another Idea Down the Drain
The amazing thing about all of this is Hritz is still a Trump tariff backer.
But that does not matter.
What does matter is many of those those laid off workers likely feel quite a bit differently. So does anyone with an ounce of common sense.
Recession Coming Up
A recession was long overdue anyway. But Trump’s inane trade policy coupled with the coronavirus will seal the fate.
Japan and Germany are already in recession.
A few days ago, I commented Japan Isn’t Headed for Recession, It’s In Recession
Today Markit reports PMI Contracts For the First Time Since Oct 2013
Supply Chain Disruption
Huge supply chain disruption is underway in cars, auto parts, iPhones, and textiles.
Please note that Half the Population of China, 760 Million, Now Locked Down
That alone would trigger a recession. The US will not be immune to a slowdown in China, Japan, and Germany.
Mike “Mish” Shedlock
You are going to find out shortly when the big steel producers in China and probably Korea and Japan declare ‘force majeur’ and don’t deliver steel.
That is indeed a very real possibility. It may begin as early as this coming week actually.
Somebody is missing the point here. Steel tariffs are to protect firms that MAKE steel. These firms are not making steel, they are IMPORTING steel and processing or fabricating it. If they were MAKING it, either from ore or from scrap, the tariffs would indeed protect them.
Clearly, this nation has lost the ability to produce, (make) steel in sufficient quantity to meet its own needs. That is not the government’s fault.
Arbitrary lines on maps never had any ability to make anything.
Economic actors, as in people, have that ability. And people in the US didn’t lose that ability, any more than Canadians lost the ability to grow bananas. In both cases, people very well can. It’s just more efficient for them to focus on something else. While letting people in more favorable locales do the steel and banana making.
Maybe he should go back to India with their graft and corruption and regulation and open a Fabrication factory/plant there:
Parth Jindal, director of JSW Steel USA and managing director of JSW Cement Ltd. in India. “It just doesn’t add up.”
After all, people are just another commodity, and if they don’t like it here on this side of the invisible line border, they can cross to the other side and enjoy the package deal there.
“But Trump’s inane trade policy” has a misspelling.
Lacks an ‘s’.
But Trump’s insane trade policy
BTW, the US has plenty of iron ore, metallurgical coal and cheap electricity especially in Texas. What it doesn’t have is labor at Indian wage levels and non existent environmental standards. That is why JSW Steel wants to import raw steel.
You make valid points with special emphasis on environmental standards. These crazy environmental standards are killing basic industries in this country.
Does anyone want to live in one of these cities in India or China where you need to wear mask many days or use machines to keep the air in your house clean. Sometimes these crazy rules help us.
Chinese and Indians are expendable. They aren’t white or african american, and not here so who cares how many are maimed or killed as long as the stock price can go up 2%
So? An Indian steel company wants to make steel products by importing steel from its India based blast furnaces but won’t source its steel from American producers. I weep for them.
Who is John Galt?
A fictional character that invented an infinite energy supply with zero pollution and an invisibility shield so Ayn Rand wouldn’t have to deal with difficult problems in her novel.
I doubt anyone in the Trump admin cares if these tariffs work or not. They’re driven by a powerful belief that the Fed will paper everything over until at least 2024. Without money printing, what else is there?
I’m not even sure the public cares anymore either. Everything is a mess, so all that’s left is to troll each other on social media. Humiliating someone on the other side of red/blue is as close to winning as any regular Joe can get nowadays. Not sure if that’s what people envisioned with MAGA four years ago, but that’s about all that remains of it.
Good post.
Economy this dead for this long eventually it will take everything under,including (eventually) big govt!Printing trillions will buy you some time ,but a dead rotting economy is like a rapidly spreading cancer,and all the QE chemo is having less and less effect.
“The amazing thing about all of this is Hritz is still a Trump tariff backer.”
He can’t survive without tariffs. Just as he can’t survive with tariffs imposed without favoritism bestowed specifically on him.
Fever and fever companies in the US can. Just as in similarly totalitarian countries, increasingly all companies only survive as a direct result of special privileges bestowed on them, by the five year planners. It’s all about protections, tariffs, licenses, restrictions on others etc. Not on bare knuckled, free competition to be the most efficient.
Hence, to survive, these companies must all spend money on lawyers and lobbyists. Instead of on developing processes rendering them more efficient at what they are supposed to be doing. Which is exactly the way lawyers and lobbyists waaaaay too stupid to comprehend hard stuff, like improved industrial processes, prefer it. And they are the ones closest to the Junta.
Tariffs on “them and them and them, but not on me, me, me! cause I’m diiiiiferent!” “Theeeyyy need to tighten their belt, but I need a bailout, because I’m a ‘job creator!’” “Otherwise, the syyyystem wiiill collaaaapse!!!” Etc., Etc.
It’s America. A shithole. By and for shit-for-brains. Unless you’re one of them, you’ll be buried under a mountain of shit. As shit is all that is left. That’s an accurate, dispassionate, neutral observation and description. Not hyperbole.
“Hence, to survive, these companies must all spend money on lawyers and lobbyists.”
Hey, lighten up. Lawyers and lobbyists have their yacht payments to make, just like everybody else!
Oh come on. America still leads the world in a number of things. For example: not even the Chinese can make semiconductors like we can. Our AIs are shitty, but they are still world leading.
In the end though, as Neal Stephenson predicted in SnowCrash, America will lead the world in four things only:
Chinese on Taiwan, and Koreans, already make semiconductors at least as well as “we” can. Using European sourced equipment. Hence why US based chip designers are going there for manufacturing expertise.
America led the world in “AIs” in the 50s as well. And that was back before diminishing returns reduced the payoff even further….. AI, beyond simplistic algorithmic optimization, never has been a manufacturing, nor even a technology, field. The only end “product” produced so far, is paper for the hopelessly gullible to “invest” in. And opportunities for hype peddlers to replace their more competent rivals as influencers of where scarce resources are being directed. Along with perhaps manufacturing of and widely disseminating, hype. Which may make certain SciFi scripts resonate stronger with movie audiences.
As for software, while pockets in the US definitely is still at the forefront, those pockets are shrinking. Seemingly most Silicon Valley software shops destroy value by now, based on customer billings vs what they spend. They only appear sustainable, on account of waves of so called “investment.” Provided by clueless clowns flush with Fed welfare.
And of those not running losses, how many are not, solely on account of most of their customers also being doused in Fed welfare, hence spending way above, and much less critically, than they would have absent easy money? Even genuine leaders like Apple, would face a big hit, if the idle, or makeworking, “investing classes” all had to produce something of value, in exchange for being in a position to buy $1200 phones which do 10% more than $200 ones. It’s the same story across much (not all) of the “IT” industry, as it was in Detroit in the 50s: “They” may make smaller, cheaper cars more efficiently, but “we” make Cadillacs…… With the main difference being, that Cadillac buyers at least had to make something in order to afford their car. They weren’t just handed their purchasing power from institutions charged with stealing it from others, and from burning seedcorn.
Movies and Music, cultural products in general, is the last bastion of a declining society. The US was big dog 50 years ago. So our culture inspired the world. “We” still live off of that. Like England did, for a long time past ceding their at one time underlying industrial and technological superiority. An increasing share of what remains of US “software” superiority, is also due to to the cultural pull of companies based in the US having the advantage of being cultural first movers. But as the reality of the sinkhole behind the shining movie sets start sinking in, so will audiences’ interests, and aspirations to partake, in US culture, leading to that current cultural advantage eroding.
Stuki, on semiconductors, the Chinese are very dependent on us. If that’s not an issue, why do they always freak out whenever Trump threatens to do an export ban? In terms of imports, the dollar value of Chinese’s semiconductor imports exceeds that of oil. Also Intel doesn’t rely on the Europeans or even the Asians. I mean just take a look at their manufacturing sites, they are mostly in the US. They are not using TSMC, etc. They run their own fabs. Also companies like Applied Materials and Lam Research lead the world when it comes to chip manufacturing equipments. And they are in the US.
On AI, the Chinese have more data, but they haven’t contributed anything new to the field. Name one major AI technique that came from China.
Look, the US has ceded a ton of things, but that doesn’t mean we are not top notch in certain fields.