US Steel Imports Surge Despite Tariffs

by Mike Godfrey, Tax-News.com, New York

05 November 2002

The imposition last March by the US of tariffs of up to 30% on various types of imported steel has had some unexpected results, and perhaps the strangest is that imports are 8% up on last year. The Commerce Department announced yesterday that, after an initial fall, imports have been increasing since June and have topped 23.9 million metric tons so far this year, up from 22.1 million a year ago.

To some extent this is because US steel-makers have been able to produce finished steel products in competition with foreign suppliers again, meaning that their purchases of foreign semi-finished products are up. Major firms such as US Steel and Bethlehem Steel import this type of steel from Korea and Latin America because it is cheaper to do so than to make it or buy it from a domestic competitor, although US Steel had to join the ranks of those lobbying for exemptions from the new tariffs in order to maintain its right to do so.

Harder to explain, though, are rises in import volumes for various products that are subject to the tariffs. Imports of hot-rolled steel, often used in appliances and machinery, have jumped 40%, while imports of coated sheet steel, often used in specialty product applications, rose 30%.

Also unpredicted are price increases on almost all categories of steel. Delphi, the world's largest automotive parts manufacturer, said recently that rising domestic steel costs would force it to shift away from local suppliers if the trade barriers continued. Alan Dawes, Delphi chief financial officer, said the tariffs were hurting US consumers because they pushed up prices. He was concerned at the financial health of some of Delphi's US suppliers of steel products.

It seems that US producers have taken the opportunity to increase their prices rather than using the time Washington gave them to restructure and become more efficient. Foreign producers, meanwhile, have switched to types of steel not covered by the tariffs, or have reduced their prices to compensate for the tariffs, apparently finding it easy to compete against the US producers even with the additional tariff handicap.

The US tariffs have come in for widespread criticism, and are the subject of WTO proceedings brought by the EU, Japan and seven other countries. The US has already partially back-tracked on the tariffs by agreeing more than 700 exclusions which cover about a quarter of the targeted steel imports. Further movement is however unlikely until after the current mid-term congressional elections, and may then depend on the make-up of the new Congress.

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