Steel is an industry worth watching closely because it’s at the forefront of the tariff battle and also at its crux.
In his initial term, Trump’s first foray into tariffs was on steel on the compelling argument that China was overproducing and dumping on the rest of the world, leaving it vulnerable.
The aim was to protect the US and rebuild industrial capacity. It hasn’t really worked as both Republicans and Democrats spent a number of years chasing away Japanese direct investment in building US mills but the sentiment is sound. Another problem is that in a hyper-financialized world of YOLO trading in tech stocks, there just isn’t much money chasing a 10% IRR on a generationally long timeline to build steel mills in an uncertain trade environment.
The lesson of the 20th century though was that it was better to slowly build like-minded trading blocs rather than cutting off the world and risking getting squeezed by a domestic monopoly.
Today, the FT reports that the UK and Europe are pitching the idea of a ‘steel club’ to the US. All would block out or heavily tariff imports while allowing preferential access to each other. There is no indication that the US is interested but it’s a sign of how leaders are looking at trade.
Ultimately, the US is worried about China and the optimal solution to that is to form alliances against China. I’m not sure the US is on that optimal path as it tries to assert dominance instead but I suspect that’s where it’s headed.
