Oh boy. Remember when President Donald Trump was railing against China for dumping steel into the United States, decimating the American steel industry? Well, it turns out that China isn’t even the main culprit of these nefarious steel gifts to American consumers. According to the US Department of Commerce, the two main perpetrators of selling Americans too much steel at too low of a price are actually Brazil and Canada.
China isn’t even in the top 10. The top 10 are actually Canada, Brazil, South Korea, Mexico, Russia, Turkey, Japan, Taiwan, Germany, and India. The rest of the entire world comprises only 22% of US steel imports.
Let’s think about this for a moment. Trump has been railing against China for decades, long before he was ever President, for decimating American steel companies. One would think that he would check into how much steel the Chinese actually export to the United States. Apparently, throughout the decades, the details didn’t interest him all that much.
It will be interesting to see how Trump deals with follow up questions about these realizations. It would mean that the two steepest tariffs he has imposed so far have been against Canada. Canadian lumber got slapped with a 24% tariff back in April of last year. An additional 25% tariff against primarily Canadian steel is likely to make the Canadians livid against these new US policies.
One could make the case that Trump is using steep tariffs as a negotiating tactic, to get other countries to lower tariffs against American products. However, Canada has no tariffs against US steel. Zero. Which makes his claims that the Canadians are “killing us” rather strange. The only US goods that Canada imposes tariffs against are dairy and poultry. This is according to Export.gov. So Trump can’t be employing steel tariffs against Canada in order to lower Canadian tariffs against US steel exports.
Might he be using the tariff weapon to lower Canadian tariffs against US dairy and poultry? This is quite a stretch. It is much more likely that in response to these tariffs, Canadian Prime Minister Justin Trudeau and his administration would impose retaliatory tariffs against US steel, which they didn’t have beforehand. This would put us steel companies in a much worse situation by far than that which they already find themselves.
Canada accounts for 45% of US steel exports according to Trade.gov. If Canada slaps a retaliatory tariff against US steel in response to this move – and keep in mind that it is not clear Trump was even aware that most steel imports came from Canada in the first place – nearly half of the entire market would be decimated, to use Trumpian terminology.
Not to mention that if the Canadians do retaliate, which they arguably would be justified in doing, Trump would look really silly and may even be forced to rescind the tariff in order to save US steel from devastation.
In any case, US steel is not doing nearly as bad as it was in 2016 and 2015. American Steel Corporation (NYSE:X) for example reported earnings of $387M in 2017 compared with losses of $440M and $1.64B in 2016 and 2015 respectively. Retaliatory tariffs could derail that recovery and put the company in serious danger.
The steel ball is now in Trudeau’s court, and he may hit back hard.