News: Steel stays protected, no matter who wins

Monday, October 28, 2024

Steel stays protected, no matter who wins

Oct 28, 2024

With help from Adam Behsudi

The United States Steel Corp. Clairton Coke Works facility in Clairton, Pennsylvania, US, on Monday, Sept. 9, 2024.

Both Kamala Harris and Donald Trump have signaled they would maintain protectionist policies as they seek to woo blue-collar voters. | Justin Merriman/Bloomberg via Getty Images

QUICK FIX

— The 2024 race has most U.S. businesses anxious, but one industry stands to thrive no matter who wins next week.

— Economists torched Donald Trump’s plans to swap income taxes with tariffs after he doubled down on the prospect during an interview with Joe Rogan.

— WTO Director-General Ngozi Okonjo-Iweala warns of potential “economic disorder” reminiscent of pre-World War II if the rules-based trading system breaks down.

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Driving the day

STEEL’S POLITICAL FORCE FIELD: No matter who wins the upcoming presidential election, the U.S. steel industry is likely to enjoy continued protection because of its historical importance in swing states like Pennsylvania.

U.S. steel manufacturers got a boost under both the Trump and Biden administrations’ embrace of protectionist trade policies — which both Donald Trump and Kamala Harris have suggested they’d maintain as they seek to woo blue-collar Rust Belt voters.

Those policies include, most notably, the 25 percent tariffs on foreign steel imports that Trump imposed in 2018 and that his successor, Joe Biden, kept largely in place.

“I think no matter who’s president, the tariffs are here to stay,” said Scott Paul, president of the Alliance for American Manufacturing, a nonpartisan group funded primarily by steel companies and the United Steelworkers union. “I don’t think there’s a question about that.”

The candidates’ alignment on steel serves as a reminder that, for all the dramatic differences between them, they are unified on the need to promote domestic manufacturing. It also underscores the enduring political power of steelmakers.

By the numbers: The sector that U.S. Trade Representative Katherine Tai has called “the backbone of the modern economy” employs only about 143,000 to 370,000 people, depending how you define the parameters, out of a total U.S. workforce of nearly 160 million.

But it looms larger in the national imagination, where steel is closely associated with manufacturing and military might.

The steel industry also has historical and cultural resonance in the battleground states of Pennsylvania and Michigan — and, to some degree, in Wisconsin. That’s three of the seven key states whose Electoral College votes are expected to determine whether Trump or Harris is in the White House next year.

The attention both presidential contenders are paying to the U.S. steel industry is par for the course in presidential politics, said Clark Packard, a research fellow at the free-market Cato Institute’s Center for Trade Policy Studies.

“I think over history you could argue that the steel and iron industries have basically had a stranglehold on U.S. trade policy,” with the highly-protected sugar sector possibly running a close second, Packard said.

Not over: Before the end of his term, Biden is considering creating a new subsidy program to stimulate more shipbuilding in the United States and boost U.S. steel demand.

Doug has more here.

2024 ELECTION

TORCHED ON TARIFFS: Donald Trump doubled down on his proposal to replace income taxes with tariffs in an interview on Friday with Joe Rogan.

“Did you just float out the idea of getting rid of income taxes and replacing it with tariffs?” Rogan asked the Republican nominee. “We’re serious about that?”

“Yeah, sure, but why not?” Trump responded. “We will not allow the enemy to come in and take our jobs and take our factories and take our workers and take our families, unless they pay a big price. And the big price is tariffs.”

That proposal faces fierce criticism from economists who call it wholly inactionable. The former president has also pitched a 20 percent universal tariff and much higher restrictions on Mexico and China.

“It's absurd. Trump is claiming to be serious about an idea that's fundamentally unserious,” said Erica York of the Tax Foundation. “Replacing more than $2 trillion of annual income tax revenues with tariffs on about $3 trillion of goods imports is not possible, nor is it desirable.”

Kimberly Clausing, a former Treasury official in the Biden administration, who is now at the Peterson Institute for International Economics, said: “Trump's plan to swap income taxes for tariffs, simply put, would be ruinous for the U.S. economy.”

“[These] tariffs would raise prices of imports and those goods that compete with them, and the massive disruption to supply chains and the harm from retaliation would hamper productivity and growth, driving the U.S. economy into a recession,” Clausing added.

Reminder: Trump campaign spokesperson Karoline Leavitt in June downplayed the former president’s proposed swap, claiming it was merely “one of many” ideas.

Around the World

DANGER WARNING: A breakdown of the rules-based trading system could create conditions like those that led to World War II, World Trade Organization Director-General Ngozi Okonjo-Iweala warned Saturday.

“So far as trade is concerned, the times are not only troubled, they are tense,” Okonjo-Iweala said in a speech at the Per Jacobsson Foundation , which is named after the IMF’s third managing director. “Trade is sometimes blamed and scapegoated for poor outcomes that really derive from macroeconomic, technology, or social policy.”

She did not refer directly in her speech to Trump or his tariff threats. But it’s well understood that if he wins the election and follows through, that would damage the already weakened WTO and likely prompt countries to retaliate.

“I hope we are not on a path that leads back to the sort of economic disorder that came before Bretton Woods – disorder that was followed by political extremism and war,” Okonjo-Iweala said, referring to a 1944 agreement that laid the foundation for post-war international economic institutions, including the predecessor to the WTO.

Mum’s the word: Okonjo-Iweala, who is currently running unopposed for a second term as director-general, is in Washington for the fall meetings of the IMF and World Bank. She arrived after attending the G-20 trade ministers meeting last week in Brazil.

The Biden administration has not publicly endorsed Okonjo-Iweala’s bid for a second term and has instead expressed concern about the accelerated process to reappoint her.

USTR Katherine Tai met with Okonjo-Iweala in Brazil, but USTR’s readout of the meeting did not address Okonjo-Iweala’s candidacy.

NON TO TRADE WARS: French Finance Minister Antoine Armand said governments need to coordinate action against non-market practices, likely referring to accusations that China is contributing to global overcapacity in sectors like steel.

When asked how France would address the potential for more tariffs if Trump were to win in November, Armand said: “If we don’t coordinate the answers to the non-market practices, at the end of the day it will create more disorder and more imbalances."

The senior French official made the remarks during the annual meetings of the International Monetary Fund and World Bank in Washington.

TRADE OVERNIGHT

— Developing world grapples with Trump — and Harris — protectionism, POLITICO Pro reports.

— Rep. Patrick McHenry eyes post-Congress move as China talks continue, POLITICO Pro reports.

— EU scrambles to prepare for a Trump return, per POLITICO Europe.

— Germany’s Olaf Scholz urges India to unblock WTO reform, per POLITICO Pro.

THAT’S ALL FOR MORNING TRADE! See you again soon! In the meantime, drop the team a line: ahawkins@politico.com, gbade@politico.com and dpalmer@politico.com. Follow us @POLITICOPro and @Morning_Trade.