President Trump signed an executive order Monday mandating a greater use of U.S.-made steel and iron in federal infrastructure projects, in yet another policy move aimed at lifting the American steel industry.
Peter Navarro, a White House trade adviser, told reporters the order would reinforce the administration’s “Buy American preferences” by requiring that 95 percent of steel and iron used in federal contracts be American-made.
It follows a similar executive order Trump signed in January and arrives a little more than a year after the president initially imposed tariffs on imported steel and aluminum. Trump said the levies would boost national security, ensure well-paying jobs and help provide leverage in trade negotiations.
Despite the federal support, the U.S. steel industry — a key priority for the Trump administration — has yet to see the kind of lasting prosperity Trump promised. While the tariffs did fuel a short-term rise in steel prices and production, the import taxes didn’t lead to a major increase in manufacturing jobs, largely because modern mills don’t require more manpower to operate at a higher capacity. And as the dawn of 2019 brought the beginnings of a global economic slowdown, steel prices have nose-dived, just as demand among key consumers has broadly weakened.
“Things came back down to earth this year because the demand pulled back and industrial economy has softened,” said Phil Gibbs, a steel industry analyst at KeyBanc Capital Markets. “Now you’ve got a year where spending in the energy sector is down, auto is down, nonresidential construction is down and durable-goods orders are falling. You do have real demand weakness in the U.S. industrial economy.”
Prices of hot-rolled coil steel — an industry benchmark — have fallen from last year’s high, $900 a short ton, to a little below $540 a short ton, according to data from CME Group. As of Monday, the S&P Supercomposite Steel Index was down more than 12 percent year to date.
Despite Trump’s repeated claims that the tariffs have refashioned the American steel industry, their most tangible impact may have been widening the gap between companies, such as U.S. Steel, that use costly legacy blast furnaces, and companies, such as Nucor, that use cheaper, more efficient electric-arc furnaces. Since Trump’s 25 percent tariff on imported steel was implemented, U.S. Steel has shed roughly 70 percent of its market value — about $5.7 billion. Last month, the company announced it would halt production at two U.S. plants, one outside Detroit, and another near Gary, Ind.
In the same window, Nucor has lost 20 percent of its market value, but chief executive John Ferriola has said the boom from the tariffs helped free up the company for $2.5 billion in expansion projects. Last month, Ferriola told Bloomberg News he thought the tariffs had expedited an “evolution” in the steel industry.
“Are some companies going to suffer? Absolutely,” Ferriola said. “We’ll we see some capacity go away, I’m sure of it.”
Meanwhile, Trump’s steel tariffs are costing U.S. consumers and businesses more than $900,000 a year for every job created, according to a report by the Peterson Institute for International Economics, a think tank that supports free-market policies. The cost is more than 13 times the typical salary of a steelworker, according to Labor Department data.
According to the most recent data from the U.S. Bureau of Labor Statistics, employment in the primary metals industry — which includes steel as well as iron, copper, aluminum and brass — amounted to a little more than 382,000 jobs. That marks a 40 percent decline in the past two decades, according to data collected by the Federal Reserve Bank of St. Louis.
Many economists and business leaders point out that jobs in steel-using industries outnumber those in steel production by about 80 to 1, according to experts at Harvard University and the University of California at Davis. But steel-using industries have been hit hard by Trump’s tariffs, and they’ve been forced to absorb costs or pass them along to consumers. General Motors and Ford said Trump’s tariffs have cost them $1 billion each.
As he kicked off his reelection campaign in Orlando last month, Trump pointed to the impact of tariffs on the steel industry as evidence of his leadership prowess.
"Thanks to our tariffs, American steel mills are roaring back to life — you know that,” he said.
But just as the halo of the tariffs faded, it’s unlikely that the new executive order will improve the outlook for American steel. While the order increases the threshold of domestic steel and iron in infrastructure projects from 50 to 95 percent, most of these projects already use majority domestic products, Gibbs said.
“Infrastructure projects are highly regional anyway, meaning if you want to do a project you’re most likely going to be using a steel from a U.S. company because you want it on a just-in-time basis,” Gibbs said. “It’s tough to know if it’ll have much of an impact at all.”