• How Will US Steel Tariffs Affect Global Trade?

      Aluminum and Steel ProductsThe U.S. government’s tariffs on imported steel and aluminum from Canada, Mexico and the European Union became effective on June 1, and this may cause slower global trading of metals, according to analysts.

      While the tariffs won’t likely affect prices for steel coil services and other steel-related work, analysts said that it might compel domestic producers to raise prices.

      Domestic Prices

      The tariffs involve 25% and 10% duties on steel and aluminum, respectively, which led industry traders to expect higher prices in the domestic market. Bart Melek, head of commodity strategy at TD Securities, said that if this happens, some higher-cost producers would be incentivized when they substitute for imported materials.

      Whether or not the new duties affect local prices, steel processing centers would remain in business due to the U.S. being a huge market for offshore steel suppliers.

      Since 2010, the country’s imported steel has reached 31 million metric tons on average each year. In 2017, imports from Canada, Mexico and the EU accounted for roughly 40% of total imports.

      Good News for Locals

      The 25% tariffs may affect global trade, but these bode well for local steel producers, as they would likely see a higher demand for their products. This would then explain why they would be able to raise prices. As of May 31, U.S. Midwest domestic hot-rolled coil steel cost $922 per short ton, up by almost 39% year to date.

      Rating agencies such as Moody’s also welcomed the tariffs by revising its outlook on the steel industry to positive from stable, since the new duties would mean fewer imports in the next 12 to 18 months.

      Conclusion

      Local steel producers would benefit from the imposed duties, but the country should be ready for the threat of retaliatory tariffs including those from Canada. In the long term, it remains to be seen whether U.S. steel imports would decline following the government’s new rules.



    Comments