2000 102 million tons
2001-2010 average 95 million tons
2011-2017 average 84 million tons
2017 total 81.6 million tons
2018-2022 average 83 million tons
2022 total 82 million tons (first estimate)
A passage from the Commerce Department’s January 2018 “Section 232” report on the national security implications of steel trade argues for a tariff or global quota, on the grounds that this would (a) reduce imports, (b) thus allow U.S. mills to run at 80% capacity instead of the 74% measured in 2017, and so finally (c) secure a U.S. national security need for long-term sources of locally cast metal. Note in particular the leap of faith in the third sentence: “If a reduction in imports can be combined with an increase in domestic steel demand, as can be reasonably expected …”:
“By reducing import penetration rates to approximately 21 percent, U.S. industry would be able to operate at 80 percent of their capacity utilization. Achieving this level of capacity utilization based on the projected 2017 import levels will require reducing imports from 36 million metric tons to about 23 million metric tons. If a reduction in imports can be combined with an increase in domestic steel demand, as can be reasonably expected [with] rising economic growth rates combined with the increased military spending and infrastructure proposals that the Trump Administration has planned, then U.S. steel mills can be expected to reach a capacity utilization level of 80 percent or greater. This increase in U.S. capacity utilization will enable U.S. steel mills to increase operations significantly in the short-term and improve the financial viability of the industry over the long-term.”
The Department eventually recommended a 25% tariff on most imported steel, and a similar 10% tariff on most imported aluminum, and received these in March 2018. The tariffs are mostly still in place (along with intense controversies between the U.S. and its allies, and at the WTO), though modified by Biden administration agreements with the U.K., EU, and Japan for duty-free imports up to a particular annual quota level.
How do the results look five years later, when compared with the report’s 2018 predictions? Useful figures come from the U.S. Geological Survey, which each year produces concise 2-page reports on mining, smelting, proven reserves, shares of world production, and other stats for 138 metals and minerals, from abrasives and aggregates to yttrium and zirconium, with salt, talc, tin, crushed rocks, gemstones, gold, rare earth elements, platinum group metals, steel, and aluminum in between. This year’s steel section, out January 31, reports the following:
(1) Output: U.S. raw steel production, at 82 million tons in 2022, was about the same as the 81.6 million tons in pre-tariff 2017, after ticking up to 87.8 million tons in 2019 and then dropped during and since the COVID pandemic. The total is more or less the same as the average output over the last decade or in the five pre-232 years.
(2) Capacity utilization: The Federal Reserve’s “FRED” database reports U.S. steel capacity utilization at 72.6% in December 2022, slightly below the 74.0% reported in December 2017. Full-year average figures were 73.5% in 2017 and 74.7% in 2022.
(3) Domestic demand: USGS’ calculates U.S. ‘apparent consumption’ of steel at 96 million tons in 2022, down a bit from 99 million tons in 2017. The 2022 figure is essentially equal to the 2007-2017 average of 95.5 million tons per year (and far below the 104 million-ton average from 1996-2006).
By these measures, the U.S. steel industry looks about the same in 2022 as it did in 2017. Thus the Commerce Department’s prediction that growth plus public policy would create “an increase in domestic demand” for steel, and long-term higher capacity utilization despite the higher prices tariffs would create, didn’t pan out. Two other measures, though, do show some changes:
(4) Trade: U.S. imports of steel were 30 million tons in 2022, well below the 42.4 million tons reported for 2017 and slightly below the 32 million-ton average from 2008 to 2017. U.S. steel exports are also down, though, from 9.6 million tons in 2017 to 8.0 million tons. In effect, since the tariffs U.S. producers have gained some market share within the United States, but lost a bit worldwide.
(5) Employment: USGS finds blast furnaces and steel mill employment down from 80,600 in 2017 to 75,000 in 2022, and foundry employment from 65,000 to 50,000. (More recent Bureau of Labor Statistics shows smaller declines, from 82,000 to 80,000 in mills and from 117,000 to 108,000 in foundries.) Either way, this isn’t a great industrial measure, since lower employment with identical output can easily reflect investment in technologies and higher productivity.
The aluminum story seems pretty similar. USGS’ aluminum survey reports 741,000 tons of primary aluminum output in 2017, rising to 1.09 million tons in 2019 and then falling back to 860,000 tons in 2022. As with steel, 2022 aluminum imports and exports were both below their 2017 levels, with imports down from 6.2 million tons in 2017 to 5.9 million tons in 2022, and exports from 1.3 million tons to 1.0 million tons. Their figure for aluminum import market share has oscillated more violently than that for steel, having risen from 33% in 2014 to 59% in pre-tariff 2017, falling to 38% in 2020 during the COVID pandemic and 41% in 2021, and then jumping back up to 54% in 2022.
In sum, imports of both metals did in fact drop after the tariffs; but the Commerce Department’s anticipation of higher output and higher capacity utilization rates didn’t materialize, and its expectation that tariffs would be consistent with rising domestic use of these metals looks a bit optimistic.
The “Section 232” site for the Commerce Department’s Bureau of Industry and Security, with links to the 2018 reports on steel and aluminum.
… or direct to the 2018 steel report.
… and direct to the 2018 aluminum report.
FRED (“Federal Reserve Economic Data”) has steel capacity utilization trends back to 1970.
The U.S. Geological Survey’s mineral commodity statistics, covering 132 substantives from abrasives, aggregates, and aluminum to yttrium and zirconium, with salt, pumice through steel, aluminum, rare earth elements, cement, gold, iridium/osmium/platinum, gemstones, tin, and more in between.
Ed Gresser is Vice President and Director for Trade and Global Markets at PPI.
Ed returns to PPI after working for the think tank from 2001-2011. He most recently served as the Assistant U.S. Trade Representative for Trade Policy and Economics at the Office of the United States Trade Representative (USTR). In this position, he led USTR’s economic research unit from 2015-2021, and chaired the 21-agency Trade Policy Staff Committee.
Ed began his career on Capitol Hill before serving USTR as Policy Advisor to USTR Charlene Barshefsky from 1998 to 2001. He then led PPI’s Trade and Global Markets Project from 2001 to 2011. After PPI, he co-founded and directed the independent think tank Progressive Economy until rejoining USTR in 2015. In 2013, the Washington International Trade Association presented him with its Lighthouse Award, awarded annually to an individual or group for significant contributions to trade policy.
Ed is the author of Freedom from Want: American Liberalism and the Global Economy (2007). He has published in a variety of journals and newspapers, and his research has been cited by leading academics and international organizations including the WTO, World Bank, and International Monetary Fund. He is a graduate of Stanford University and holds a Master’s Degree in International Affairs from Columbia Universities and a certificate from the Averell Harriman Institute for Advanced Study of the Soviet Union.
Read the full email and sign up for the Trade Fact of the Week