US Steel User Hits At Administration's Steel Tariffs

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

17 October 2002

The US administration's protectionist steel tariffs, imposed last March to a chorus of protest from steel-producing nations, and which seem to be failing in their supposed goal of encouraging restructuring in the inefficient US steel industry, have now been attacked by a major US user of steel products.

Delphi, the world's largest automotive parts manufacturer, said yesterday 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.

Delphi is the leading supplier of steel products to the motor industry, the biggest user of steel, and its warning puts more pressure on Washington for an early end to the tariffs. Delphi spends $1bn a year on crude steel and finished steel products. It says that long-term contracts have so far shielded it from the effects of the price rises, but as it negotiates new supplies it is starting to buy steel products from abroad.

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 US congressional elections set for November, and may then depend on the make-up of the new Congress.

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