Can Trump’s proposed tariffs revive the steel industry?

December 7, 2024

(NEW YORK) -- President-elect Donald Trump this week vowed to block the purchase of U.S. Steel by Japanese steelmaker Nippon Steel Corp., promising to bolster the domestic steel industry with tariffs.

“I am totally against the once great and powerful U.S. Steel being bought by a foreign company, Trump said in a post on Truth Social, pledging to make U.S. Steel “Strong and Great Again, and it will happen FAST!”

Trump has proposed a tax as high as 20% on every product imported from all U.S. trading partners, as well as a tax of between 60% and 100% on all goods from China, the world’s leading steel producer.

Those policies could modestly improve the outlook for domestic steelmakers by hiking prices, boosting revenue and increasing employment, though the benefits would not lift the sector to the heights attained in its heyday, experts told ABC News.

The experts warned, however, that a potential rekindling of consumer price increases as a result of the wide-ranging tariffs could damage the steel industry as part of a wider economic slowdown.

The policies also risk harming the nation’s manufacturing sector as a whole, since the tariffs would hike costs for factories that rely on raw steel as an input, making those firms less competitive with their international counterparts, the experts said.

“We have tried to help the steel industry many, many times before,” Kyle Handley, a professor of economics at the University of California, San Diego, told ABC News, pointing to steel tariffs established during Trump’s first term and retained under President Joe Biden.

“Yet, here we are and the industry still needs more help,” Handley added.

In response to ABC News' request for comment, the Trump transition team touted the tariffs imposed during his first term in office.

"In his first term, President Trump instituted tariffs against China that created jobs, spurred investment, and resulted in no inflation. President Trump will work quickly to fix and restore an economy that puts American workers [first] by re-shoring American jobs, lowering inflation, raising real wages, lowering taxes, cutting regulations, and unshackling American energy," Trump transition spokeswoman Karoline Leavitt said in a statement.

Tariffs remain popular with steel industry leaders. The Steel Manufacturers Association, or SMA, the largest U.S. trade association representing steelmakers, has urged the incoming Trump administration to strengthen steel tariffs.

“We are under constant threat from nonmarket economies who evade our trade laws to dump cheap, heavily subsidized, high-emissions steel and other products into the American market, making it hard for domestic manufacturers to compete,” SMA President Philip Bell said in a statement on Tuesday.

“Fortunately, President-elect Trump has vowed to use every tool he can to end unfair trade while stimulating growth in jobs and productivity,” Bell added.

In 2018, Trump slapped tariffs on aluminum and steel from a host of countries, including Mexico, Canada and the European Union.

Over the ensuing years, U.S. steel prices soared and output climbed.

The average price of a ton of hot-rolled steel -- a common metric used for steel prices -- soared from about $700 to $1,850 between 2017 and 2021, according to a study last year by the United States International Trade Commission, a government agency.

However, prices also spiked in non-U.S. steel markets over that period amid a global rise in demand, leaving only a modest impact from the tariffs, the study found. Steel production showed a similarly incremental advance, ticking upward by nearly 2% per year on average due to the tariffs, the study showed.

“It was a good thing for the steel industries because they were getting higher prices for steel and producing more,” Handley said.

The tariffs did not cause a sustained increase in employment for the steel industry, however, according to some data. Nationwide employment at steel and iron mills stood at 80,600 in 2017 -- and registered the exact same number of workers last year, government data showed.

Technological advances in steel production have made the work less labor intensive, reducing the need for employees, Katheryn Russ, an economics professor at the University of California, Davis, told ABC News.

The proposed across-the-board tariffs could amplify the benefits for the steel industry that resulted from tariffs initiated during Trump’s first term, Russ said. But, she added, “It is unclear how it would affect employment in steel plants.”

Trump’s proposals would also intensify the negative effects that resulted from the first round of tariffs, including cost increases for a range of manufacturers that use raw steel as inputs, experts said. Those higher costs would hurt the competitiveness of such U.S. producers, risking lost revenue and potential layoffs, they added.

“Everybody who buys steel would now have higher costs,” Handley said. “We can have a debate about who should win or lose from that, but you can’t have everybody win.”

Economists widely forecast that tariffs of the magnitude proposed by Trump would also increase prices paid by U.S. shoppers, since importers typically pass along a share of the cost of those higher taxes to consumers.

A potential price spike risks slashing consumer purchases and slowing the economy, which would hurt a wide swath of businesses, including steel producers, Gordon Johnson, whose firm, GLJ Research, analyzes the steel industry, told ABC News.

“People will buy less of everything,” Johnson said. “That would be very bad for all U.S. businesses -- steel companies as well.”

Still, Johnson said he understands the enduring cultural resonance of the steel industry, citing the phenomenon as a reason for why the sector receives attention from policymakers.

“When you say ‘steelworkers,’ you think of some guy who gets up at 6 a.m., gets McDonald’s coffee, puts on overalls and a big flannel and goes to work in the mill,” Johnson said. “He’s a hard worker and a quintessential U.S. citizen.”

He added, “Steel was a historic and traditional American staple. That’s why people care so much.”