Fastmarkets’ steel team shares key insights into the intricate effects of Trump’s steel tariffs on global trade and US manufacturing. Read the full article and view interactive charts below.
With Donald Trump winning a second term as President of the USA, Fastmarkets is considering the policies that may be put in place that will affect the domestic and global steel markets. In this instalment, we consider the likelihood of heightened trade policies in the wake of Trump’s first term as well as his 2024 campaign rhetoric.
As the campaign intensified, the president-elect noted that he would support US manufacturers by putting tariffs on imported goods, going so far as suggesting a 60% tariff on Chinese imports. Upstream steel product imports, such as bars, coil, plate, sheet and tube and pipe, are not well represented by Chinese-origin supply. In fact, US steel product imports averaged just over 29Mt in the 2015 to 2023 period with the 2015 to 2018 period averaging over 33Mt. Of these imports, China accounted for 3.3% of all steel tonnage imported in the 2015-2023 period, falling to 2.45% in 2024 (January to September period). A further tariff on only Chinese steel will have little effect on the overall steel import tonnage.
Moreover, when the Section 232 actions were initiated in March 2018, US-based manufacturers criticized the move, stating that while they were required to purchase higher-cost steel only to then compete with imported goods made from foreign steel.
That point is illustrated in import data for steel-containing machinery, vehicles, appliances and railroad rolling stock. Imports of these goods, in US dollar values, reached over $850Bn in 2023. For the 2015 to 2023 period, China accounted for 22% of that total in that nine-year period. Fastmarkets suggests that tariffs on China will be targeted to downstream parts or finished products, rather than upstream steel. These measures are likely to affect the broader economy, however, raising costs to downstream manufacturers and consumers.
US manufacturers would benefit from reduced competition, allowing them to increase market share and potentially raise prices to either grow margins or recoup higher steel costs. Nevertheless, if Chinese producers put a stop on shipments of intermediate parts to the US, opting for established markets in Latin America, Southeast Asia or Middle East, US manufacturing could be paralyzed until higher cost alternatives as higher are sourced.
The result is that US prices of manufactured goods will likely rise, affecting domestic demand and adding inflationary pressure to the US economy.
Fastmarkets believes more steel tariffs will be in the offing under the 47th Presidential administration. Domestic steelmakers did benefit from the Section 232 actions which resulted in higher steel prices and margins, as noted in the HR coil price with the vertical line indicating the initiation of the tariffs/quotas. We take the example of HR coil prices as a representative of a key US steel market indicator.
US HRC prices initially increased after the imposition of the Section 232, then declined steeply through 2019 on weak fundamentals, falling further in 2020 as the result of the effects of the Covid pandemic. Nevertheless, with the import supply of steel tightened in the US, Fastmarkets notes that price volatility is higher than before the 232.
The Section 232 actions had the intent of maintaining total US steel capacity utilization at or above 80%. This has not been achieved consistently since 2018 either. Indeed, weekly utilization rates for all US crude steel capacity have largely held below 80% since mid-2022. An important reason why utilization rates have remained under 80% is that capacity has increased to meet demand as tariffs have reduced imports.
Despite this, US steelmaker margins for HR coil production are higher post-232 than before as shown by the Fastmarkets calculated proxy based on raw materials, energy, inflation and operating costs. In the five years leading up the Section 232 actions, the average margin was slightly over $400 per tonne. In the 2018 to September 2024 period, the average margin was nearly $640 per tonne. Removing 2021 from the calculation, given inflationary effects of the immediate post-covid period, the average margin is still more than $100 per tonne over the pre-2018 margin.
Even under challenging demand conditions in 2024, margins are higher, albeit more volatile, than prior to 2018, suggesting that further measures would be welcomed by domestic steelmakers.
Trump’s re-election has set the stage for potential shifts in trade policies and tariffs, with significant implications for both the US and global steel markets. With proposed tariffs targeting downstream products and the lingering effects of Section 232 actions, US steelmakers have seen increased margins, despite market volatility and capacity challenges. These policies may provide relief to domestic manufacturers but also carry the risk of heightened costs for consumers and broader economic impacts.
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