President Donald Trump’s latest steel and aluminum tariffs doubled the previous tariffs on imports of those metals to 50%. Those import taxes will, no doubt, be tough on a lot of sectors of this economy, and, by extension, U.S. consumers.
But the American steel industry is welcoming the new tariffs. In fact, domestic steel producers have been investing in new capacity ever since Trump first imposed tariffs on imported steel and aluminum back in 2018.
Pacific Steel Group, a steel fabricator and installer based in Southern California, is in the early stages of building a new steel mill in the Mojave Desert. Once the plant is open in a few years, the company will make its own rebar, too.
“This project is for us to really vertically integrate, and now, produce our own reinforcing steel, so we’re not beholden to out-of-state producers,” said Mark Olson, Pacific Steel Group’s vice president of mill operations.
The facility will make that rebar by using electricity to melt down scrap metal. Olson said that’s a big reason why the company’s building here in the Mojave Desert — because the nearby Los Angeles area has plenty of scrap metal.
“Most of that gets put in containers and shipped overseas,” Olson said. “The rest gets put in rail cars and trucks and shipped out-of-state, where steel is manufactured. So this is an opportunity for us to localize that supply chain.”
Olson said the president’s new metals tariffs didn’t have any bearing on the company’s decision to make its own steel. But he said those tariffs certainly didn’t hurt.
“We want to be sure that we’re not unfairly impacted by steel coming in that’s either subsidized or produced and not playing by the same rules if you will,” Olson said.
Ever since the first Trump administration imposed steel tariffs in 2018 there has been a wave of investment in domestic steel production.
“And now, assets are being built and turned on and ramped up in the U.S.,” said Josh Spoores, head of Steel Americas Analysis with CRU Group.
Spoores said a big reason is that between those tariffs, and all of the supply chain congestion early in the pandemic, steel prices rose. As a result, steel makers wanted to cash in.
“Any price increase went directly to the bottom line, and that just further incentivized new plans for further investment in the U.S.,” Spoores said.
Spoores said domestic steel production will grow in the coming years, as more new mills come online.
Philip Bell, president of the Steel Manufacturers Association, said most of them will operate like the one in Mojave: They’ll make steel by melting down scrap metal with electricity.
“Right now, about 70% of all the steel that’s made in the United States uses ferrous scrap metal as its primary raw material, and electricity as its primary energy source,” Bell said.
Bell said compared to old-fashioned methods of making steel, such as coal-powered blast furnaces, the electric method is much better for the environment.
“We’re not mining iron ore, we’re not mining coal, to make this steel,” Bell said. “We’re taking steel, and basically remaking it into steel again.”
But there are limits to the economic benefits of domestic steel production. Allan Collard-Wexler, a professor at Duke University, said modern steel manufacturing is incredibly sophisticated. It requires a lot of automation.
“There’s labor intensive and not-so-labor intensive parts of the economy,” Collard-Wexler said. “And steel is just one of these not-so-labor-intensive parts of the economy.”
And even though the domestic steel industry is being protected by the Trump administration’s tariffs, the manufacturing sector, which buys steel, is going to end up paying more for it. That’s because tariffs will lead to higher steel prices across the board, said Teresa Fort, an economics professor at Dartmouth College.
“When your costs go up, you have to raise prices, and then consumers buy less, and so those firms end up shrinking. All the firms that rely on steel as an input will shrink.
A recent paper written by researchers at the Federal Reserve Board of Governors found that the 2018 steel and aluminum tariffs caused producer prices to rise. They also caused manufacturing employment to fall.
