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Analysis: Trump's 'blanket' steel-import tariff now more like a shawl

New York — That was one big 9 million mt sigh of relief heard from Canada and Mexico, as well as from steel buyers in the US who depend on supply from the two countries, now the North American Free Trade Agreement trading partners are excluded -- initially at least -- from the imposition of a 25% tariff on US imports of steel products.

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President Donald Trump signed off on a 25% tariff on imports of steel and a 10% tariff on imports of aluminum late Thursday, excluding imports from Canada and Mexico. The tariff orders will be effective March 23.

Related feature: Trump's steel and aluminum import tariffs

In 2017, the US imported 36.9 million mt of steel -- counting all carbon, alloy and stainless products. Sparing Canada and Mexico preserves 8.9 million mt of those imports, undoubtedly much to the relief of the many steel-using, cross-border manufacturers bridging the US, Canada and Mexico -- especially those serving the automotive sector.

The United Steelworkers is a winner with this decision, since the union represents workers in both Canada and the US. While consistently in support of steel trade relief, the USW fought hard for Canada's exclusion.

But it also diffuses some tension and awkwardness among the major North American steel producers represented by the American Iron and Steel Institute, the trade association which has more ardently backed the imposition of tariffs. Its member companies are from the US (12), Canada (4) and Mexico (5). So companies like ArcelorMittal Dofasco, ArcelorMittal Mexico, Algoma, Stelco, Ivaco, Altos Hornos, Deacero, Ternium and Tenaris can maybe breathe easier.


CARVING UP THE CARVE-OUTS


In its recommendations to the president, the US Department of Commerce said the goal was to reduce the 2017 level of imports by 37%. With Canada and Mexico out of the equation, that 37%, or about a 13 million mt reduction -- off the 2017 total of nearly 37 million mt -- will presumably be borne by the non-excluded countries.

Unless the goalposts just shifted.

Excluding Canada and Mexico, US imports from all other countries totaled 28 million mt last year. If the 37% reduction objective relates to the post-Canada and Mexico total, then the shared impact among all other countries will be about 10 million mt.

But that's the big picture.

On much a smaller scale, the Canadian and Mexican exclusions will reverberate far more loudly elsewhere. There may even be bells ringing in those fairly small border towns where ports of entry are arguably more heavily dependent on steel imports for local jobs and local economic vitality than the major steel-handling ports.

This includes towns at the Canadian border like Pembina, North Dakota, and Ogdensburg, New York, and cities like Laredo, Texas, at the Mexican border -- and Detroit with so much US-Canadian integrated manufacturing and movement of goods between it and Windsor, Ontario.

The top five US ports receiving steel last year, based on sheer tonnage, were Houston; Mobile, Alabama; Detroit; Philadelphia; and Los Angeles.

But when examining a port's steel tons received divided by local population -- on a per capita basis, such tons become more critical to the lifeblood of those communities.

Based on S&P Global Platts drilldown of import data, nearly 54 mt of imported steel per capita is handled by the port at Pembina followed by Ogdensburg (26 mt/capita); Mobile (9 mt/capita); Laredo (6 mt/capita) and Detroit (5.6 mt/capita). By comparison, the largest-tonnage port for steel imports, Houston, handles about 1 mt/capita.

--Joe Innace, joseph.innace@spglobal.com

--Joe Eckelman, joe.eckelman@spglobal.com

--Edited by Keiron Greenhalgh, keiron.greenhalgh@spglobal.com