INSIGHT-Trump steel tariffs bring job losses to swing state Michigan
By Rajesh Kumar Singh
CHICAGO, Feb. 6 / PRNewswire / - President Donald Trump promised a fresh start for the struggling US steel industry in 2016, and the lure of new jobs in Midwestern states, including Michigan, gave him a surprise election victory.
Four years later, Great Lakes Works - once one of the largest steel mills in the state - stopped making steel and made 1,250 workers unemployed. A year before the June layoffs, plant owner United States Steel Corp announced a plan to invest $ 600 million in upgrades should market conditions worsen.
Trump's strategy focused on protecting US steel mills from foreign competition with a 25% tariff imposed in March 2018. He also promised to stimulate steel demand through major investments in roads, bridges and other infrastructure.
However, higher steel prices due to tariffs weighed on demand from the Michigan-based US auto industry and other steel consumers. And the Trump administration has never implemented an infrastructure plan.
Michigan's strong confidence in the steel and auto industries puts Trump's trade policy at the fore ahead of the November 3 presidential election in this battlefield nation. Democrats say they want to recapture the workers' votes they lost to Trump four years ago - a key factor in his victory over Hillary Clinton. Trump won Michigan with less than one percent of the nationwide vote. Competition for votes from the often unionized manufacturing workers who have voted democratically in the past will be just as fierce in the battlefield states of Wisconsin and Pennsylvania, political analysts say.
Biden leads Trump in Michigan by 8 percentage points, according to a Reuters / Ipsos poll of likely voters from September 29 to October 6, which extended his lead over a few weeks earlier.
At the national level, the steel industry cut jobs last year - since the major economic downturn caused by the COVID-19 pandemic - and employs 1,900 fewer workers than when Trump took office, according to the US Department of Labor. (You can find a graphic on steel work at https://tmsnrt.rs/2SRIEaF.)
While the tariffs didn't boost steel employment overall, economists said they caused higher costs for large steel consumers - jobs at companies like Detroit-based automakers General Motors Co and Ford Motor Co. were killed. Nationally, steel and aluminum tariffs resulted in at least 75,000 job losses in the metal-using industry by the end of last year, according to an analysis by Lydia Cox, Ph.D. Candidate in Economics from Harvard University and Kadee Russ, Professor of Economics at the University of California at Davis. Overall, they estimated, the trade war had caused a net loss of 175,000 US manufacturing jobs by mid-2019.
In Michigan, steelmakers have served dismissal letters to nearly 2,000 workers since the tariff went into effect. This emerges from a Reuters analysis of the announcements filed with the state by steel companies. The state's primary metal industry, which includes iron and steel mills, employed around 7,300 fewer workers in August than in March 2018 when Trump announced metal tariffs, according to the St. Louis Federal Reserve Bank.
The setbacks in the steel industry account for only a fraction of the job losses in Michigan manufacturing, which now employs 55,100 fewer workers than when Trump took office in January 2017, US Labor Department data shows. The state's auto industry was responsible for 35% of manufacturing job losses, according to the St. Louis Fed.
It remains to be seen whether such statistics will change the minds of swing state voters. According to Bill Wischman, finance manager at a Ford manufacturing facility in Plymouth, Michigan, Trump did more to protect U.S. manufacturing than any of his predecessors.
"He put all his heart into trying," said Wischman, 51, a Republican who voted for Trump in 2016.
Bob Kemper, chairman of the complaints committee in the United Steelworkers (USW) Union's Great Lakes Works chapter, blamed Trump for the job losses.
"I don't see any politics that have helped us," said Kemper, who supports Biden. "We're losing our damn jobs here."
The 1.2 million member United Steelworkers (USW) Union, which represents US manufacturing workers in many industries, supported Clinton in the last election and this time will support the Democrats again. Kemper admitted that many of his employees voted for Trump in 2016 but says support has waned along with the fate of Michigan's steel industry.
Trump made similar campaign promises for 2016 to revive the ailing coal industry by pulling back environmental regulations. Employment in this industry, however, has fallen 9% to around 46,000 since 2016 as 66 coal-fired power plants - nearly a fifth of the US total - closed. The economic losses come despite government efforts to ease restrictions, including limiting carbon emissions and discharging coal waste into streams.
The Michigan Republican Party did not respond to requests for comment. Peter Navarro, White House director of trade and manufacturing policies, didn't answer questions from Reuters about the data showing job losses in steel and manufacturing.
When US steel idled Great Lakes Works, which primarily serves the automotive industry, it cited weak demand, lower steel prices and a new corporate strategy to invest in more cost-effective technologies. In May, Cleveland-Cliffs Inc announced that the steel line and several other operations in the Detroit area would be closing, laying off 343 employees. It cited "rapidly deteriorating business conditions".
A Cleveland-Cliffs spokeswoman didn't answer questions about the impact Trump's trade policies had on business.
US steel defends Trump's tariffs. Company spokeswoman Meghan Cox said the policy was helping "ensure the strength of American steel production capacity during this pandemic."
The company's shares have fallen around 82% since early March 2018 - the month Trump announced steel tariffs - compared with the S&P 500 rising 28% over the same period. US steel prices are now 33% below their May 2018 peak, but remain 21% higher than world market prices due to tariffs - a void that affects the competitiveness of US companies that manufacture products from domestic steel.
"No matter what the tariff, you can't sell anything when demand is limited," said Ned Hill, professor of economic development at Ohio State University.
Trump said at a rally in Pennsylvania last August - as steel companies struggled with falling demand and falling prices - that his tariff had turned a "dead" company into a "thriving" one.
The tariffs originally benefited companies like US Steel and Nucor by restricting competition and boosting prices. At the end of 2018, US steel workers secured a cumulative wage increase of 14% over a period of four years.
The tariffs also led to investment, said Jeff Ferry, chief economist with the Coalition for a Prosperous America, a non-partisan trading group. Older coal-fired power plants like Great Lakes Works closed because of outdated technology, he said.
"We're not doing this to save individual jobs," Ferry said at short notice about the tariffs. "If you expand the industries over the long term, the number of employees will increase."
That is little consolation for workers laid off by Great Lakes Works who have found it harder to get new jobs amid the pandemic, Kemper said. The twin cities of Ecorse and River Rouge, which have been heavily reliant on tax revenues from the plant, are also hurting, the city mayors said. Ecorse used to collect up to $ 6 million in property taxes from the mill - or half of its earnings, said Mayor Lamar Indwell, a Democrat.
Many Democrats have supported steel tariffs. The Biden campaign did not respond to a request for comment on its steel trade policy. In a statement to USW in May, Biden said steel tariffs would remain in place until a global solution to limit overproduction - mainly in China - can be negotiated.
USW also supports tariffs, but says the Trump administration has undermined policy by granting requests from US steel makers to exempt their imports, removing the benefit to domestic steel.
FARE HITS MICHIGAN AUTO FIRMS
According to industry experts, the tariffs had a profound impact on steel consumers. According to Kristin Dziczek, vice president of industry, labor and economics at the Center for Automotive Research, all three Detroit automakers - General Motors, Ford, and Fiat Chrysler Automobiles NV - have closed a Michigan plant since January 2018. Both General Motors and Ford reported increased steel costs of $ 1 billion each in 2018.
GM declined to comment on the impact of the tariffs. A Ford spokeswoman said the automaker was struggling with higher raw material costs in 2018 as it buys 95% of its steel from domestic suppliers. While crude steel prices have fallen since then, Ford's manufacturing costs are still elevated due to U.S. tariffs on auto parts made in China, she said. Retaliatory tariffs from China have also cut Ford's vehicle exports to the country.
Companies further down the auto supply chain have also felt the effects of Trump's trade policies.
Jeff Aznavorian, Michigan director of Clips & Clamps Industries, buys steel from U.S. plants to make metal and tool parts for Japanese and Detroit-based automakers. He said his company had lost contracts worth up to $ 3.6 million in the past two years. Competitors making parts in Canada and Mexico now have an advantage because steel costs have been lower in those countries.
Aznavorian said he could move some of his business overseas.
"I need to be in a place where I can buy raw materials at a competitive price," he said.
(Reporting by Rajesh Kumar Singh; additional reporting by Timothy Gardner; editing by Caroline Stauffer and Brian Thevenot)
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