Trump ‘Buy American’ edict may have little impact on US steel
DETROIT/ NEW YORK: US President Donald Trump’s ‘Buy American, Hire American’ executive order left questions about how the government would enforce the order and whether it would make a real difference in output and employment, according to steel executives and analysts.
‘Buy American’ provisions already exist in US law but policing them has been difficult because of waivers granted to foreign companies that undercut their US counterparts on pricing. Earlier on Tuesday, Trump ordered a review of government procurement rules favouring American companies to see if they are actually benefiting, especially the US steel industry.
Trump’s executive order promises to properly police those provisions, but avoided detail about how that will happen.
Bill Hickey, president of Chicago-based Lapham-Hickey Steel, which has seven steel mills in the Midwest and Northeast, said he has heard talk of ‘Buy American’ for decades, but American or foreign contractors frequently find loopholes to use imported steel.
“Politicians all talk the same, but at the end of the day it just doesn’t work,” Hickey said, citing waivers to existing provisions.
Charles Bradford of Bradford Research said focusing on “Buy American” for US steel does not take into account that some steel products – including tin plate and semi-finished products – are not made in the US. So if enforced improperly, it could cause supply problems in a US market in which up to 25 per cent of steel was imported in the first quarter of this year.
“The people who have pushed for this don’t have a clue and they don’t know math,” said Bradford.
Cutting off the supply of goods not made in the United States would create fresh problems for US companies, he said.
In the construction industry, there also are concerns over “too strict a definition of what constitutes US-made steel products,” said Kenneth Simonson, chief economist of the Associated General Contractors of America.
Simonson cited concerns with steel that might have been melted down from scrap metal that could have come from outside the United States, for example, and tracing its origins before that point.
Trump’s White House track record so far also helps fuel skepticism inside the industry.
Instead of bold action promised last year by then-candidate Trump on the North American Free Trade Agreement, on China, and free trade agreements, the new administration has “not shown much evidence of doing so,” said KeyBanc Capital Markets steel analyst Philip Gibbs.
“I’m a lot less optimistic than I was three-and-a-half months ago because so far what I’ve seen coming out of the Trump administration is the same as the prior administration,” he added.
As a result, Gibbs said investors should dial back expectations that Trump will do anything meaningful on trade, or on infrastructure which is where such an order could make a difference.
Investors seemed to shrug off Tuesday’s executive order.
Nucor Corp shares closed up 0.2 per cent at US$57.33, AK Steel Holding Corp gained a penny to end at US$6.32 and US Steel Corp closed down 0.5 per cent at US$28.73.
AK Steel did not respond to requests for comment. Nucor and US Steel both welcomed the president’s executive order. — Reuters
The people who have pushed for this don’t have a clue and they don’t know math. Charles Bradford, Bradford Research