Arkansas Online reports Tire-cord makers with operations in Arkansas threaten closures after bid for tariff exclusion contested.
Bekaert Corp., Kiswire America and Tokusen USA jointly requested blanket exclusion from what they described as “grade 1078 and above wire rod for tire cord” that they import, arguing that the quality of wire rod they require is unavailable from U.S.-based steel producers.
If they can’t get access to the imported steel they need, the companies say they will close their operations. Together, they employ 1,500 people at four plants in Arkansas.
“Stated simply, U.S. wire rod producers are incapable of producing grade 1078 and above wire rod to produce tire cord because that grade of wire rod must be produced in basic oxygen furnaces to achieve the strength, cleanliness and other properties to draw the wire rod to tire cord dimensions,” according to the companies’ legal representative, the Washington, D.C., law firm of Morris, Manning & Martin LLP.
But the Wire Rod Coalition, a trade organization of U.S. producers of carbon and alloy steel wire rod, disagrees and has filed an objection to the request for a blanket exclusion.
Coalition members say they can and do make the same quality steel tire cord without using the basic oxygen, or blast, furnaces that Bekaert, Kiswire and Tokusen say their steel requires. “Grade 1078 and above tire cord wire rod can be and is produced using electric arc furnace steel,” the coalition’s legal counsel, Kelley Drye & Warren, said in a formal objection.
Image from Rubber and Plastic News.
Trade Foolishness
People buy into that notion because it is repeated often enough.
But whether or not such steel is available in the US, those manufacturers will face much higher costs.
The same applies to every company in the US that uses steel or aluminum.
Job Reality
Employment is down 57.7% while production is up 7.7%. Those steel jobs are lost and gone forever. It’s called productivity.
Jobs at Risk
There are about 6.5 million workers at manufacturers that use a lot of steel, but only 140,000 steelworkers, says Moody’s.
To protect 140,000 jobs Trump is willing to put 6.5 million workers at risk.
How stupid is that?
It’s so stupid US Steelworkers do not even support Trump’s latest play with Mexico and Canada.
Spotlight On Cars
Trade War Math
Trump Madness in Numbers
- 6.5 million US employees benefit from lower prices.
- Only 140,000 employees benefit from tariffs.
- 325 million US consumers benefit from lower prices.
- Cheap steel is to the benefit of US exporters if the EU applies tariffs and the US doesn’t
If, as claimed, China is dumping steel, it is to our benefit at China’s expense!
Only economic fools cheer Trump’s trade madness.
Addendum
The above image is from Steel Industry Productivity with thanks to reader “Thimk” (not a typo).
A Bloomberg News story from June 20, 2017 offered a fascinating look at how a modern plant can now produce high-quality steel with few workers.
The plant in Donawitz, a two-hour drive from Vienna, needs all of 14 employees to make 500,000 tons of steel wire a year. The same mill in the 1960s would have needed as many as 1,000 workers to produce a similar amount albeit of lesser quality.
“We have to forget steel as a core employer,” Voestalpine CEO Wolfgang Eder told Bloomberg.
The policy point is that Mr. Trump’s tariffs are trying to revive a world of steel production that no longer exists. He is taxing steel-consuming industries that employ 6.5 million and have the potential to grow more jobs to help a declining industry that employs only 140,000.
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- NAFTA is Dead: Trump Seeks Separate Agreements With Mexico and Canada
By the way, this setup is eerily similar to events leading up to the start of WWI. For discussion, please see Europe’s Nationalism and Trump’s Trade Policies Look Like WWI Prelude.
Mike “Mish” Shedlock
Realist – I find your views on this subject very refreshing. Completely agree when you say that tariffs will not work for Trump as they address the jobs of the past; if outsourcing does not get them, automation will!
Question: with the exorbitant cost of upskilling (education), how is the USA to continue developing? Here’s an article about a community trying to make the gig economy (the current employment fad in the tech industry) work for them and failing: https://www.theatlantic.com/business/archive/2018/06/gig-economy-inequality/560942/
The problem for me continues to be that technology is taking away all these old jobs and is not replacing them fast enough any more. Irrespective of people’s assertions – technology takes away jobs and replaces them with “the same number” of higher end jobs, I find that hard to believe. My observation in the business world is that jobs get automated, and convert very quickly into 2 categories:
It is extremely difficult to break out from the latter category to the former, partly because people in the latter category cannot invest the time and money to learn the skills for the former, and partly because of the increased competition for such jobs…
I wonder why more emphasis on getting skilled trade training isn’t be pushed. In other countries like Germany they have a data bank on what skills are needed and in high school students are separated into a trades like educational track and the others into a college bound track. If someone wants to go to college instead of a skilled trade they still can.
At the G6+1 today Trump surprised the others by suggesting they all get rid of all tariffs and price supports. What do you think of that Mish? Personally, I love The Donald’s negotiating style.
This is nothing compared to 60,000 American factories that have already closed, destroying countless American jobs, in large part due to China’s granted WTO status. Which has apparently been abused according to an article i read recently.
The free traders are forgetting the offset. They say that the price increase due to tariffs affects more people than the people who get the benefit. They do not take into account the increase in taxes which decreases the deficit which is a plus for all Americans.
Our economy has not been in order for decades. Trump will just accelerate the downturn.
“Grade 1078 and above tire cord wire rod can be and is produced using electric arc furnace steel,” the coalition’s legal counsel, Kelley Drye & Warren, said in a formal objection.”
“For every action, there is an equal and opposite reaction.”
It’s going to take years to recover the economy and get everything back in order once we get rid of Trump.
It sounds very efficient with so few employees needing to make tire cord all those charts proving that. Who needs China? The whining converters that don’t want change.
“Plant… needs all of 14 employees to make 500,000 tons of steel wire a year. The same mill in the 1960s would have needed as many as 1,000 workers…”
Mish – There is something wrong here. The graph shows an 85% reduction in man hours per ton since 1960. If that results in 14 employees, then the original number in 1960 should have been 100, not 1000. Either that, or the 14 current staff should be 140.
Now we know how Trump is paying for the tax cuts.
This is perfectly normal, and an expected consequence. If you put a tariff on Steel and Aluminum, you kill off any manufacturers who use steel and aluminum as an input. There is simply no way for an American manufacturer to compete with foreign products anymore. So, we lose all the tire-chord makers, and many, many other similar manufacturers who use steel or aluminum? It’s OK, because we do it in the name of economic ignorance. The same thing happened in 2002, and it’s important to repeat the disasters of the past occasionally so that we don’t forget them. (sarcasm intended)
Addendum added – Thanks to reader “Thimk”
Understood but the idea is the same if we are getting crappy trade terms with whoever, it doesn’t hurt to try and renegotiate better terms. Maybe the bluster and threats work and maybe they don’t but it may be worth trying. Hopefully it doesn’t backfire. An interesting documentary on free trade is available online by Milton Friedman. He basically repeats what Mish states ie accept incoming trade no matter what. But what works in theory doens’t always work in practice. So if the US is consistently on the short end of trade deals it is worth trying to fix. I don’t know the intricasies of these disagreement but hopefully he is arguing valid points.
The laws of physics and psychology do not apply to Trump and his negotiating tactics. He is operating in other dimensions beyond the realm of mere mortals. He is one of the characters from an Avengers movie with superpowers never dreamed of in a president. So they say.
LoL 9D chess really? He caved in on the ZTE deal after the Chinese started to slowdown US products at the border. I’ll be surprise if he even plays 1D checkers
Has that ever been successfully pulled off in the history of mankind? No!
Has that ever been successfully pulled off in the history of mankind?
This is the problem with Trump’s 9D chess, eventually everyone learns to play. The blueprint is the ZTE method of threatening to go nuclear and eliminate all jobs, ruining the optics of the whole endeavor. Every company should threaten this in the future.
Will they be telling the truth, that they’re forced to permanently close doors? Who knows, it’s 9D chess baby!
Except that he is imposing those tariffs to EU/Canada and Mexico…
At least this may cause the inflation that the fed wants so bad. I have spoken with an owner of a tier 1 automotive supplier and his distaste for China is off the charts. I cant remember all the trade issues he has had with the Chinese bottom line is they are horrible to deal with. He had to build a plant in China at the demand of of one of the big three, that replaced a profitable plant elsewhere in Asia and stated it was never profitable. Between govt coruuption, dishonesty and labor corruption making the parts was a nightmare. He finally closed the plant after the agreement terminated and left. They ship inferior parts to the US deliberatly made against specifications and when their parts fail there is no recourse . You have to sue in China and even if you are fortunate enough to get a favaorable verdict you won’t collect. Trade wars are not a good idea but when the Chinese engage in gangster business practices I don’t see why it isn’t a good idea for the US to attempt to get better trade deals. I am hoping Trumps threats are just a bargaining tactic and don’t come to fruition but will secure better trade arrangement around the world,
Mish said: ” People buy into that notion because it is repeated often enough.” That is a feature not a bug.
Guess who used that a lot? The author of these: “If you tell a big enough lie and tell it frequently enough, it will be believed.”
“Make the lie big, make it simple, keep saying it, and eventually they will believe it.”
What if one country is temporarily dumping some commodity just to put the target country’s companies out of business, then will raise the prices enough to make up the original losses and then some? Sure the source country is losing initially but not in the long run.