Angst over steel tariffs continues to grow for metal manufacturing industries

Manufacturers that rely on certain types of specialty steels, such as stainless steel, want to have tariff exclusions applied to these types of imports. The federal government hasn't been very accommodating. PhonlamaiPhoto/Getty Images

The United States’ third tariff-rate quota (TRQ) agreement, this time with the United Kingdom (U.K.), was supposed to make metal users in the U.S. happy about being able to procure some foreign steel and aluminum without paying the extra costs of import tariffs. But this new TRQ, announced March 22, as with the second one with Japan (not covering aluminum) in February, and the first one with the European Union (EU) announced last December, only succeeded in promoting more disgruntlement because they do nothing to alleviate supply chain problems.

While admitting the TRQ might help some U.S. metal manufacturers who continue to have long delivery delays and pay the highest prices in the world, the Coalition of American Metal Manufacturers and Users (CAMMU) complained: “However, it is disappointing that the agreement will not completely terminate these unnecessary trade restrictions on one of this country’s closest allies, the United Kingdom. As we are already seeing with the U.S.-EU TRQ agreement where some steel products’ quota filled up for the year in the first two weeks of January, this type of government restriction on raw materials and intervention leads to market manipulations and allows for gaming of the system that puts this country’s smallest manufacturers at an even further disadvantage.”

The “gaming” of tariffs also applies to the rocky exclusion process where domestic steel manufacturers unfairly block the issuance of tariff exclusions sought by U.S. manufacturers of food processing equipment, automobiles, appliances, and other products that are suffering from high prices and supply chain snafus. The U.S. Department of Commerce’s Bureau of Industry and Security (BIS) is now conducting its sixth review of that exclusion process.

“NAFEM members, like other U.S. manufacturers using steel and aluminum, continue to experience steep prices on necessary inputs, limited or, in some cases, reneged supplies of essential raw materials, escalating supply chain challenges, and long delivery delays,” said Charlie Souhrada, vice president, regulatory and technical affairs, North American Association of Food Equipment Manufacturers.

Donald Trump imposed the steel and aluminum tariffs in 2018 because of national security tariffs. But as President Joe Biden’s administration tries to strengthen U.S. defense relationships with the EU, Japan, and Great Britain in the face of the Russian invasion of Ukraine, some political pundits wonder if it is slightly counterintuitive to maintain steel tariffs on those same countries.

Paul Nathanson, a CAMMU spokesman, called national security tariffs on the EU, U.K., and Japan “ridiculous” in the wake of the Russian assault.

Effective June 1, the U.S.-U.K. TRQ sets an import volume for steel at 500,000 metric tons for 54 product categories and allocated in line with the 2018-2019 historical period. The annual volume for aluminum is 900 metric tons for unwrought aluminum under two product categories and at 11,400 metric tons for semifinished (wrought) aluminum under 12 product categories.

These TRQ agreements still impose the 25% percent tariff on steel imports and 10% tariff on aluminum imports from the EU, U.K., and Japan. Given supply chain problems, the issuance of tariff exclusions by the Commerce Department—more likely its failure to do so promptly—is increasingly controversial.

For example, Bobrick Washroom Equipment, which manufactures stainless steel dispensers, disposal cabinets, and grab bars in its Jackson, Tenn.; Durant, Okla.; Clifton Park, N.Y.; and Toronto factories, argued: “Currently, the exclusion process relies on self-serving declarations from domestic stainless steel suppliers of the hypothetical availability of various types and forms of stainless steel.” In comments to the BIS, Bobrick said suppliers have “manipulated the domestic supply of stainless steel by shuttering mills and consolidating the industry. Finally, the domestic suppliers have placed their customers on severe allocations, successfully restricting supply and boosting price by over 50%.”

Magellan Corp. in Deerfield, Ill., which sources, sells, and distributes specialty steels and other metallurgical products, stated: “It appears that domestic manufacturers can essentially pick and choose which importing companies receive an exclusion, through what appears to be akin to veto power over requests.” Magellan wants the BIS to establish a central database, which includes detailed information on specific past exclusion requests so an importer doesn’t have to assemble that information itself.