Steel Caucus Talks About What Should Replace Section 232 Tariffs on Europe

The steel caucus hosted an online panel Sept. 30 with steel executives and the head of the United Steelworkers union. Section 232 with Europe was a major topic of discussion, though they also talked about how steel might be taxed if a carbon tax or carbon border adjustment tax begins.

Caucus Co-Chairman Rep. Frank Mrvan, D-Ind., said, "We know that when the administration put that [Section 232 tariff] in place, it wasn’t going to be put in place for eternity," but, he said, the U.S. still has to protect itself against "bad actors and subsidized steel."

Co-Chairman Conor Lamb, D-Pa., said he wanted to hear from executives and the union on "where we need to go" with Section 232 in order to prevent import surges. When the tariffs on Canadian and Mexican steel and aluminum were rolled back, those countries agreed to a monitoring system to avoid import surges.

United Steelworkers President Tom Conway said that the Section 232 tariffs have been helpful and using the base period just before the pandemic as a measure of where to set quotas would be a mistake. "This industry is running the way it oughta run, at about 85% capacity," he said. The original aim of the Section 232 tariffs was to get the steel industry running at 80% capacity. "We can’t just say prices are high, ' inflation,' get a panic over it," he added. "We have an opportunity now to reset things and make it right."

Co-Vice Chairman Rick Crawford, R-Ark., asked the panel if China is the source of overcapacity that drives down steel prices, "Shouldn’t we be letting our allies off the hook?" It wasn't clear if that was a leading question, or if he thought Europe should not be subject to the tariff.

Greg Murphy, general counsel at Nucor, replied, "China is obviously the poster child for these issues, but one of the things we can’t overlook is steel that’s being melted and poured [in China] ends up in the EU, and then ends up on the shores of America." Murphy said Nucor and other American steel companies run their companies with the necessary discipline, and when they have mills that are not performing, they shut them down. He said that the EU produces more steel than it consumes, and said, "China alone is not the problem and we’ve got to be very very careful about steel flowing from markets that are already overfilled like the EU."

Steel Dynamics CEO Mark Millett said that the EU has 30 million tons of excess capacity. He and others complained that steel companies in Europe and Canada are receiving billions of dollars in grants to help their companies decarbonize, while American firms used their own profits to shift to cleaner electric arc furnaces. Those furnaces must use somewhat processed inputs, either reduced iron ore that was formed in a blast furnace or steel scrap.

"We need trade constraints," Millett said. "It doesn't have to be the 232 as it is today, but certainly some sort of constraint."

Conway said, "Tariffs aren’t always a long-term solution, but the premise that it’s there to protect the national security … that doesn’t fade away." He said there are a lot of trade lawyers "who like an existing [antidumping] system where we’re back in front of that firm day after day because someone changed a molecule of boron or something." He said a tariff rate quota on European steel would help steelmakers save on antidumping cases and preserve a healthy domestic industry.

ClevelandCliffs CEO Lourenco Goncalves agreed. "China is the enemy, I have no doubt about that. But right now, I don’t call out China alone. I believe that the friends are a lot worse than the enemies. EU is a big problem; Canada is a big problem; Mexico is a big problem; and on top of that we have South Korea. If we’re going to do away with Section 232, we absolutely need something as strong as [it], because the problem is not going away."