Trump’s threat on steel import tariffs already spooking buyers

President Donald Trump’s pledge to safeguard US steelmakers from cheap overseas shipments is already working even as hopes fade of an imminent announcement of measures.

At least that’s what Cliffs Natural Resources Chief Executive Officer Lourenco Goncalves says is happening as buyers shy away from imported steel in case the White House hands down restrictions that would invoke retroactive penalties. The ensuing increase in demand for domestic metal is allowing US producers to push up prices, he said in a telephone interview.

“We are seeing that happening right now,” said Goncalves, whose company sells iron ore to US mills. “Right now there’s a lot of people who are scared.”

Commerce Secretary Wilbur Ross has flagged possible tariffs, quotas or both to limit imports on grounds of national security under the seldom-used Section 232 of the Trade Expansion Act.

While potential curbs on both steel and aluminium have pushed up producers’ shares in the US, they have also drawn warnings from top economists including Former Federal Reserve chairman Ben Bernanke as well as buyers of metal products from Caterpillar to Coca-Cola that a crackdown on imports could push up costs and squeeze margins.

“We are concerned that any import restriction on these types of aluminium will result in retaliatory action by other countries on American exports such as American scrap metal and American agricultural products,” packaging and food and beverage companies wrote in a July 24 letter to Trump.

The administration had given itself a June deadline to complete the 232 investigation. But in an interview with The Wall Street Journal this week, Trump said he’s waiting for policy decisions on health care, tax reform and maybe even infrastructure to conclude before steel dumping measures are considered.

Goncalves said the holdup is tied to the push-back from several industries that worry duties could start a trade war. He still expects Trump to make a decision because a delay can only affect prices for so long before the market assumes it’s not going to happen, and it’s in the president’s political interest to get something done.

“Trump is too smart, politically, to miss the idea that he needs to do something based on 232 at some point, or else he is definitely hurting his ability to be re-elected,” Goncalves said.