It’s been a little while since I last posted but with all of the chaos and hand wringing that ensued before the tariffs went into effect, I could not really gather my thoughts together. Now, even at this point there is a lot of uncertainty that is currently giving jitters to our steel market but I feel that at least some of my thoughts have crystallized on what’s going on that I can pass along at this time.
The other day a good customer pushed and squeezed me very hard to give him my gut check on the whole tariff / steel market situation and that forced me to really think about what we are seeing. Granted, I am no prophet and my crystal ball is currently in the shop for repairs 🙂 so all I am presenting here is MY GUT CHECK.
Let’s start with this piece:
They lay out the case that the steel industry was really doing well without the tariffs – so why are they necessary? In addition to this, I have been asking myself “The president is no dummy, even simple people like myself understand how tariffs historically have hurt the economy and have had the opposite effect of what they were intended to accomplish. Why in the world would he push this? – Even he knows that it could spark a trade war which would be so harmful. Why is he so stubbornly sticking to this approach? What is he thinking?? There has to be more to it than what meets the eye….”
Personally, my feeling is that this is not really about steel. Steel is being used as a pretext to get tough on trade with other countries. If you dig around and look at the hard facts, other countries have hit the U.S. time and again with stiff tariffs but expect the U.S. not to respond in kind.
So actually, free trade is not exactly free trade. What it often means is all other countries get to import into the U.S. freely but not the other way around.
Of course you could argue that with everything it is still well worth it for the U.S. to eat those losses of the duties paid to other countries for the benefits of keeping things flowing into the U.S. but it is not as cut and dry as some like to suggest.
Everybody and their uncle has been screaming Henny Penny / Chicken Little that the sky will fall down and the entire world economy will go up in smoke as a result of the recent trade action taken. The “Pundits” said the same thing about President Trump’s approach to dealing with North Korea and lo and behold look where we are with that. :
Additionally, in order to upset and change the status quo that has been in place for many decades (as far as trade goes) there has to be a drastic move to get other countries’ attention. Notice though that Mexico and Canada have been exempted from the trade action for the meantime in order to give them the opportunity to offer up a beneficial deal to the U.S. in the renegotiation of NAFTA.
By the way, here is some helpful and informative history on tariffs in general and some very useful context:
In any event, as to be expected (think the mills were not involved in getting this all pushed through???) we have news of a couple of steel mills reopening shuttered plants right on queue.:
Right now things are chaotic and point to a shortage of material in the marketplace and no one knows how it will ultimately shake out BUT certainly do stay tuned as we will certainly be keeping a sharp on on developments as they unfold.
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Ben Levi – Premium Steel Sales