Steel Tariff Impact

Section 232 Tariff – Steel & Aluminum

What is the Section 232 Tariff?

Section 232 steel tariffs are broad taxes on imported steel and aluminum products. The impacted commodities and products range from flat raw steel to semi-finished steel to finished tubular products and much more.

Why were they implemented?

The Secretary of the Department of Commerce recommended use of the powers provided to the President under Section 232 of the Trade Expansion Act of 1962 to protect US steel manufacturing capabilities. Secretary Ross recommended a quota or tariff to “remove the threatened impairment to national security.”
Link: Presidential Proclamation
Link: Depart. of Commerce – Report “The Effect of Imports of Steel on the National Security”

Section 232 Timeline:

January 19, 2018 – Secretary of Commerce transmitted report to the President on his investigation into the impact of imported aluminum and steel articles
March 8, 2018 – President issued Proclamation 9704 – Adjusting Imports of Aluminum into the United States effective March 28, 2018
March 22, 2018 – President issues Proclamation 9710 – Adjusting Imports of Aluminum into the United States – exemptions for Argentina, Australia, Brazil, Canada, Mexico, South Korea, and European Union enacted until May 1, 2018
May 31, 2018 – President issues Proclamation 9739 – Adjusting Imports of Aluminum into the United States – exemptions for Argentina, Australia, and Brazil enacted. All other countries subject to tariffs.

Tariff Impact

Impact on US Energy Industry

The US energy industry relies heavily on imported steel and aluminum. The tariff will require price increases across the oil and gas industry consequently increasing the cost to complete capital projects. Increasing the cost of oil and gas production as a result of the Section 232 tariff is at odds with the President’s Energy Independence Policy.
“The actions taken today are inconsistent with the Administration’s goal of continuing the energy renaissance and building world class infrastructure,” API CEO and President Jack Gerard said in a statement in March. “The U.S. oil and natural gas industry, in particular, relies on specialty steel for many of its projects that most U.S. steelmakers don’t supply.”

Link: American Petroleum Institute – Trade Policy

Impact on Coiled Tubing

The coiled tubing industry utilizes highly alloyed grades of low carbon steel. International steel manufacturers produce more than 95% of the steel utilized for production of coiled tubing. Manufacturers of coiled tubing source these advanced steel chemistries from Germany, France, Japan, and China. These tariffs dramatically increase the cost and consequently reduce manufacturer ability to compete with low priced Chinese and Russian coiled tubing producers.

Link: What is Coiled Tubing?

Impact on Community/Small Town America

These trade policies directly affect local governments. Most heavy industries that utilize substantial quantities of steel and aluminum products operate out of Small Town America. Global Tubing, the largest private employer in Dayton, Texas, provides the local government revenue to improve schools, roads, and further economic development goals.

Impact on Global Tubing

Global Tubing was founded with the goal of utilizing domestic steel sources. After 3 years of extended trials, GT was forced to use international steel suppliers to meet our quality control standards and the product performance expectations of its customers.

These tariffs not only hurt the coiled tubing industry, but impact many other small businesses in small town America.

Additional Links

Canadian Government Responds with Tariffs on US Made Products
American Petroleum Institute – Section 232 Policy Position
Forbes – On Steel Tariffs, The Math Just Doesn’t Add Up
Market Realist – Why Economist Argue That Tariffs Are Bad For The Economy
Wall Street Journal – Steel Tariffs Likely to Lead to U.S. Job Losses, Fed Economists Find