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Solving the American Steel Crisis

By Jelani Rucker
on April 30, 2018

The new steel tariffs have countless critics, but many business leaders believe they’re critical for the health of both the American steel industry and the entire country. Zekelman Industries’ Executive Chairman and CEO Barry Zekelman explains in a recent podcast that tariffs are not the perfect solution, because they can be gamed, but they are at least a starting point in overcoming the crisis in the American steel industry. We have to do something, he says, to lower the amount of steel imports coming into the country so American mills can run at higher capacity levels, create jobs, and enable investment in this industry that’s so vital to the nation.

Tariffs Won’t Start a Trade War — They’ll Help End One

Some critics say tariffs can’t solve the issue of global overcapacity at the heart of the steel crisis, and will just lead to a trade war. But the truth is, the trade war started decades ago. And now, facing astronomical trade deficits, we need to end that trade war and return to the free, but fair trade environment we experienced in the early 1970s. Tariffs are one way to start this process because they help even the playing field. We need everyone to start playing by the same rules so we can re-establish a balanced trade relationship with China and other countries.

Tariffs Can Help Rebuild the American Middle Class

For decades, economists have watched the depletion of the middle class in America. Many have suggested increasing the minimum wage as a solution, but we can’t force that to happen. What we really need to do is create demand for higher-paying jobs in this country. Tariffs can help do this by decreasing the volume of imports from countries with cheap labor, and providing an opportunity for Americans to step into domestic manufacturing jobs that pay higher wages with benefits. These types of jobs form the foundation of the middle class and are essential for supporting families and building communities.

Beyond Tariffs

In addition to steel tariffs, Barry Zekelman says understanding three key points will help the American steel industry grow:

  1. The rise in domestic steel prices is negligible.
    Yes, steel tariffs are causing domestic prices to rise, but the increase is long overdue. And we need to remember that steel is only a small component of most finished goods. For example, steel comprises only about 4% of the cost of a building, so the increase in steel prices makes little difference in terms of the total price tag.
  2. We can’t let countries circumvent duties.
    We need to examine the content of the products we manufacture, identify where the steel was made, and tag the duties accordingly — across the entire supply chain. This is the only way to prevent countries from circumventing the duties.
  3. Imports don’t really save consumers money.
    Some critics say dumped imports are a gift to consumers. But buying cheaper imported goods actually contributes to our national deficit, and consumers end up paying the difference later in the form of taxes or inflation. There’s truly no escaping the real cost of goods — so it’s better to just buy American to begin with.

To learn more, listen to Barry Zekelman’s interview on The Manufacturing Report podcast.