Scraponomics Episode 106: Tariffs on Imported Steel

“People who bite the hand that feeds them usually lick the boot that kicks them.” — Eric Hoffer, American philosopher and author

In recent episodes, we’ve talked about the potential reasons for the drastic decrease in the commodity markets, like the Chinese housing bubble, the strength of the US Dollar, and the Longshoremen labor dispute. However, there’s another area worth looking into; that is, the amount of foreign steel being imported into the US.

Remember, mills and foundries are the companies that melt metals down and turn them into new blocks or sheets that manufacturers can then buy to make new products. We’ve run into this weird situation where manufacturers in the US are currently able to buy new steel from foreign mills for cheaper than if they were to buy that steel from mills in the US. This is due to a few reasons, some of which are cost of labor, the high value of the US Dollar, and other countries manipulating their currencies.

Because manufacturers begin to favor the purchase of foreign steel, this creates a surplus (and, therefore, less of a demand) of steel at domestic mills. Because they have a surplus of material, they no longer have a need to purchase as much scrap steel from domestic scrap-processors. This can then cause the price of scrap steel to drop dramatically.

To prevent things like this from happening, many countries charge a tariff, or tax, on imported steel so that it doesn’t cripple their domestic industries. Only recently, after multiple cases have been filed by US steel producers, has the US Department of Commerce threatened to place a 236% tariff on some imported steel. The idea is not to eliminate competition, but rather to at least create a level playing field

What are your thoughts? How do you feel about tariffs on foreign steel? Join the conversation and let us know!

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