Impact of Steel Tariffs on Pipe Exports

Apr 2019

Implementing steel tariffs was not an arbitrary decision made by the President of the United States. The decision was in response to disruptions in the steel market over the course of a few years. Generally speaking, the steel industry is known for being cyclical in nature and reflective of general market conditions (Frost & Sullivan).

However, in 2014 there was a disruption in the steel market when China’s export market grew significantly and “dumped” its excess steel inventory into numerous countries across the globe. In turn, this had devastating economic impacts on the producers of steel in those countries that received the surplus Chinese steel. These cheap imports led to some manufacturers limiting operations or stopping production altogether, which resulted in numerous layoffs at some of the world’s leading steel mills, including those in the US and Europe (Frost & Sullivan).

In 2018 the US government took action and implemented anti-dumping measures to protect its local steel manufacturers from the negative economic impacts of cheap imports. Initially the 25% duties on steel and 10% duties on aluminum were imposed upon all countries except Canada and Mexico due to the NAFTA agreement (Frost & Sullivan). This meant that our organization, Titan Tube & Metal could continue exporting its inventory into the USA without an issue.

However, on March 31 2018, it was announced that tariffs would also be placed on Canadian and Mexican steel being shipped into the United States. Canada is the leading importer of American steel, and as a result, Canada announced that it intended to impose trade-restrictions as a counter measure. Since the implementation of steel tariffs, companies like Titan Tube have been forced to re-evaluate whether cross-border shipments for its steel pipe, tube and casing products are the best option for its inventory, given the additional costs brought upon by the tariffs.

Fortunately, Canada and Mexico are working diligently to re-negotiate these tariffs with the USA. Canada, Mexico, and the United States have since signed a revised NAFTA agreement that is awaiting on ratification by all three countries. Former Prime Minister Pena Nieto of Mexico said he would not ratify the new agreement until the tariffs were removed. This sentiment was echoed by Canadian Foreign Affairs Minister Chrystia Freeland, who informed President Trump that Canadians do not want Parliament to approve the new NAFTA agreement until the tariffs are removed (Daniel Dale).

On February 21, 2019, Canada’s Ambassador to the US said he was hopeful that the tariffs would be lifted. He reiterated this thought again on March 17, giving Canada hopes that its trade relationship with the US was headed in the right direction. This would allow steel suppliers like ours to once again freely ship across the border without being penalized by the tariffs.

On the other hand, US Trade Representative Robert Lighthizer boasts that tariffs have been very successful and any resolution must be one that protects the program implemented by President Trump, which may mean other restrictions like quotas could be implemented in lieu of tariffs if negotiations pursue. Canadians have expressed their concern with quotas too, arguing that it constrains growth and steel consumption should be left to the free market (Daniel Dale).

For now, Titan Tube and other steel suppliers eagerly await more concrete news on trade negotiations and the predicted impacts on their business. Have the tariffs and uncertainty in the international trade arena impacted your business?

For more information, visit the sources below:

https://ww2.frost.com/frost-perspectives/challenges-and-opportunities-steel-industry/

https://www.bloomberg.com/news/articles/2019-03-24/a-year-on-trump-s-metals-tariffs-have-more-losers-than-winners

https://www.thestar.com/news/world/2019/03/12/trump-wont-lift-tariffs-on-canada-without-quotas-or-other-protection-us-trade-chief-suggests.html

https://www.thestar.com/news/world/2019/03/25/canadians-dont-want-nafta-deal-ratified-until-tariffs-lifted-freeland-says.html

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