Steel industry urges Trump to keep tariff pedal to the metal after early uptick in output, jobs

The steel industry is pleading with President Trump to maintain his tariff on key metal imports because the no-exceptions policy shows promise.

Federal data show that since Mr. Trump took office, U.S. employment in the fabricated metals sector has increased by 3,400 workers and primary metal manufacturing has grown by 2,600.

Raw steel production is up 6% from Jan. 20, and capacity utilization, a key measure of efficiency within a given sector, is up 3.7 percentage points.

“Shipments have been up. People are having stronger first quarters than, certainly, the fourth quarter of last year,” said Kevin Dempsey, president and CEO of the American Iron and Steel Institute. “I think we need, probably, more time to be able to really document [the tariff’s impact] firmly, but we do expect it to be positive and helpful to domestic steel.”

In mid-March, Mr. Trump imposed a 25% tariff on all steel and aluminum imports. This was an early test case for his trade plan, which evolved as markets panicked or countries negotiated.

Mr. Trump announced sweeping reciprocal tariffs April 2 on dozens of trading partners but froze them for 90 days shortly after they went into effect.

“We’ve said to the administration, ‘Negotiate on the reciprocal tariffs. Do the deals you need to do. But don’t, don’t, don’t throw the steel tariffs in there,’” Mr. Dempsey said.

He said it was crucial that a recent deal to de-escalate the U.S.-China trade war did not water down the tariffs on Chinese steel.

Protecting the U.S. steel industry was a cornerstone of Mr. Trump’s “America First” pitch to blue-collar workers during his 2024 campaign. This year’s tariffs on steel and aluminum are extensions of measures Mr. Trump imposed in his first term. President Biden largely kept the levies in place, and both men looked askance at a Japanese company’s attempt to acquire U.S. Steel, an iconic American company.

Excess production in China resulted in a flood of cheap metals dumped in the U.S., undercutting the domestic industry and making the U.S. overreliant on foreign metals.

Mr. Trump’s second administration determined that too many countries received exemptions from preexisting metal tariffs, so the president made the levies sweeping and airtight.

“By granting exemptions to certain countries, the United States inadvertently created loopholes that were exploited by China and others with excess steel and aluminum capacity, undermining the purpose of these exemptions,” a White House fact sheet said.

Matt Meenan, vice president of external affairs for The Aluminum Association, said it’s early, but “as a general rule, there’s a lot that we like” in the tariff policy.

Like steel, the aluminum industry is concerned about overproduction in China, but its big request is a deal with Canada that slashes the 25% tariff on aluminum imports to zero.

Mr. Meenan said the U.S. industry has been growing, but mostly in downstream operations such as rolling mills and recycling operations.

“We import an enormous amount of primary aluminum from Canada,” he said. “So in order to feed those investments, we need access to metal.”

Canada is flush with electricity from hydroelectric operations in Quebec and elsewhere, but it is difficult to obtain the kind of affordable electricity needed to build new smelters in the U.S.

“A single smelter takes about the same amount of electricity every year as the city of Boston uses, or the city of Nashville,” Mr. Meenan said. “We would need to build about five smelters to sort of meet our current import gap with Canada.”

The industry is hopeful that the U.S. will reach a deal with Canada as U.S. officials become familiar with the new leaders in Ottawa and both sides revisit the U.S.-Mexico-Canada trade agreement.

In the meantime, some industry players are worried that the overall tariff landscape is creating uncertainty that could drag down the economy.

Hydro, an aluminum and renewable energy company with 32,000 employees in 42 countries, said the tariffs would not drive interest in new U.S. smelters.

“Permitting and constructing a new primary smelter would take upwards of six to seven years and cost billions of dollars, and this is not a decision that can be taken based upon a tariff policy that frequently changes,” said Anders Vindegg, head of media relations at Hydro. “Producing primary aluminum is a very energy-intensive process, and the main obstacle continues to be the lack of competitively priced, long-term power.”

Mr. Trump has made cheaper energy production a key plank of his early months in office. He said prices will come down as part of an interlocking agenda that includes tariffs, less red tape and lower taxes.

“Steel and aluminum production are critical to America’s national and economic security. The Trump administration’s ‘America First’ agenda of tariffs, deregulation, and unleashing American energy is strengthening our nation’s steel and aluminum industries,” White House spokesman Kush Desai said.

Some hurdles are on the horizon. The U.S. Chamber of Commerce and others argue that the steel and aluminum tariffs will result in higher costs for American manufacturers that rely on the metals, putting them at a disadvantage with global competitors.

“Price hikes for industrial inputs like steel and aluminum hurt a broad swath of downstream manufacturers across the United States, from the auto and aerospace sectors to food producers and the oil and gas sector,” John G. Murphy, a senior vice president at the chamber, wrote in a recent blog post. “For every job in steel production, there are roughly 80 Americans employed by manufacturers that use steel as an input.”

The U.S. steel industry said the domestic market keeps prices competitive.

The alternative, it said, is allowing other nations to dump vast amounts of cheap metal into the country, wiping out homegrown steel plants and making America reliant on foreign manufacturers.

Another concern is that other nations are retaliating against Mr. Trump’s taxes on steel and aluminum imports.

Last week, India told the World Trade Organization that it is considering new tariffs on U.S. products in response to Mr. Trump’s steel and aluminum tariffs, even while it tries to finalize a bilateral trade agreement with the U.S.

In April, the European Union approved a series of retaliatory tariffs on $23 billion worth of U.S. goods in response to Mr. Trump’s steel and aluminum tariffs. However, after the White House froze its hefty reciprocal tariff plan, it paused those levies to give negotiations a chance.

“Agriculture will likely be the hardest-hit industry from retaliatory tariffs. Trump gave farmers a $28 billion bailout to make up for tariff-related harms during his first term, and he has already floated more bailouts this term,” said Ryan Young, a senior economist at the Competitive Enterprise Institute.

He said the EU also has targeted U.S. appliance makers and the textile sector for retaliation, “though a trade agreement would likely avoid that.”

Britain took a collaborative step to reduce some U.S.-imposed tariffs. It negotiated a trade deal with the Trump administration that included a mechanism for slashing levies on British steel and aluminum destined for the U.S. once both sides work through national security concerns.

Britain is not a big-time player in the steel industry.

“I doubt that anyone else would get that deal,” said Gary Hufbauer, a nonresident senior fellow at the Peterson Institute for International Economics.

He said South Korea would be a bellwether regarding whether the Trump administration is willing to grant any relief from steel tariffs.

The steel industry was happy that a recent de-escalation deal with China did not affect steel tariffs. China is considered the main culprit in the massive oversupply of cheap steel flooding the global market.

“That’s really important. That’s what we continue to urge them: Hold the line on that,” Mr. Dempsey said. “They’re going to be under a lot of pressure from a lot of other countries.”

For now, the administration is taking pains to demonstrate its commitment to U.S. steel production.

Vice President J.D. Vance hailed an “industrial renaissance” during a tour this month of a Nucor Steel plant in South Carolina.

“I hope every single one of you, you guys in front of me, feel a sense of pride because these are the products that actually make America work,” Mr. Vance said.

Nucor recently told investors that it expected its earnings to improve in the second quarter “primarily due to higher average selling prices at our sheet and plate mills.”