IHS Markit, a London-based economics research firm, conducted a survey of just over 800 manufacturing companies between October 12-26 and discovered that President Trump's deepening trade war would raise prices for US consumers (tariffs are a hidden tax), but here is the shocker: it will not bring back many overseas manufacturing jobs. As the administration's tariffs on $34 billion worth of Chinese goods kicked in July, President Trump, White House officials, and conservative media unleashed a wave of propaganda emphasizing that higher duties would encourage the revival of America's manufacturing sector. By Sept., Trump announced another round of new duties of 10% on $200 billion in Chinese imports, which will increase to an eventual rate of 25% by Jan. 01. To make matters worse, China immediately implemented retaliatory tariff, calling it the "biggest trade war in economic history." Months later, the administration's promise of a manufacturing revival through taxing Chinese imports had backfired. More than 4 in 10 companies surveyed said they are raising prices to offset the higher cost of production (again, a tax on American consumers as real wages remain to stagnate). About 1 in 10 said they expect to reduce the share of total output manufactured outside the US. Approximately the same number said the tariffs would encourage them to move more jobs back home. Trump has touted on social media that "JOBS are coming back to America" as proof that his strategy is working. On Wednesday, he tweeted a steelmaker's plan to create "600 good-paying U.S. JOBS." Steel Dynamics announced that it will build a brand new 3 million ton steel mill in the Southwest that will create 600 good-paying U.S. JOBS. Steel JOBS are coming back to America, just like I predicted. Congratulations to Steel Dynamics! — Donald J. Trump (@realDonaldTrump) November 28, 2018 However, those gains were wiped out by a headline earlier in the week that General Motors would layoff some 14,000 workers in North America and close five manufacturing plants. GM CEO Mary Barra said the company faced many challenges but did not explicitly link Trump administration tariffs, the automaker has been under severe pain by the rapid rise in steel prices from US duties on imported steel and retaliatory auto tariffs by China. "They left us hanging." GM is cutting more than 14,000 jobs and plans to focus on electric and self-driving vehicles pic.twitter.com/0gorVPOsMS — TicToc by Bloomberg (@tictoc) November 28, 2018 The layoff list continues to grow this month... Lay offs I’ve seen announced in last month, explain why this is evidence of a strong economy? GM Blue Apron Bombardier Reuters Disney Starbucks NBC Universal Cisco Western Sugar CA Technologies Union Pacific Haagen Dazs Boston Scientific Wells Fargo IKEA Pfizer Ford Hasbro pic.twitter.com/SdzXeRqlo9 — OW🎄 (@OccupyWisdom) November 29, 2018 Earlier this month, another survey showed more than 70% of US firms operating in Southern China are considering delaying further investment in the country and are moving manufacturing facilities to other countries as the trade war deepens. According to the poll by the American Chamber of Commerce in South China, which surveyed over 200 companies, US firms operating in China warned - they are experiencing extreme difficulties from trade disputes than firms from other countries. 64% of the companies said they were planning to relocate supply chains outside of China, but only 1% said they would even consider establishing manufacturing bases in North America. “While more than 70% of the U.S. companies are considering delaying or canceling investment in China, and relocation of some or all manufacturing out of China, only half of their Chinese counterparts share the same consideration,” the AmCham report said. As the trade war deepens, supply chains in China are being forced to shift to Southeast Asia - not back to North America, the survey found. In short, the global supply chain is a huge, complicated process. Nonetheless, we can make some informed assumptions if the tariffs are actually working, in accordance to Trump admin's revival narrative of the economy. Glancing at the Federal Reserve Bank of Philadelphia’s monthly state leading indicator maps. They project state-by-state economic conditions six months into the future based on key metrics like housing permits, initial unemployment benefit claims, delivery time for goods produced by manufacturers, and the spread between short- and long-term interest rates, said The Washington Examiner. The first map is for Sept. 2018, along with Aug. 2018 for comparison. The Aug. map shows most states west of the Mississippi River in forest green, indicating high pace growth. However, one month later, in Sept., a number of those states turned a paler shade of green, which showed slower economic growth. August 2018 State Leading Indexes September 2018 State Leading Indexes Across the map, the slowdown was seen in Iowa, Nebraska, North Dakota, and South Carolina. The first three laggards are heavy grain exporting states; South Carolina is a heavy exporter of manufactured goods. What can we infer? Maybe trade wars are starting to bite, and an economic blowback is shortly around the corner for the Trump administration.
President Donald Trump claimed Thursday that General Motors’ decision to shutter plants and lay off workers is an exception to market trends in the industry under his administration, praising a foreign automaker and apparently touting the steel tariffs that may have contributed to GM’s downsizing.“General Motors is very counter to what other auto, and other, companies are doing,” Trump tweeted. “Big Steel is opening and renovating plants all over the country.”GM announced on Monday that it would cut nearly 14,000 jobs in North America, including closing as many as five U.S. plants in states like Ohio and Maryland that currently assemble poorly selling models. Trump has assailed GM in the aftermath of the announcement, which undermined one of his chief campaign pledges — to bring manufacturing jobs back to the U.S. While the White House’s deregulation agenda has sought to boost U.S. manufacturing, Trump’s trade maneuvers — including steep tariffs on steel and aluminum imports, potential tariffs on auto imports and an emphasis on auto rules of origin in a new U.S.-Mexico-Canada trade deal — have received a mixed reception in the industries Trump has said he’s trying to salvage.Steel tariffs levied by the administration have proven thus far to be a double-edged sword — while GM directly cited the tariffs in its announcement on Monday, the U.S. steel industry has seen modest gains. Trump celebrated an announcement earlier this week that steel producer Steel Dynamics would open a multimillion ton plant in the U.S., creating hundreds of new jobs. But the president, who is prone to embellishment, may be overstating the revival of the steel industry. He repeatedly insisted over the summer that one steel producer in particular, U.S. Steel, is building as many as six new steel mills. While the company has announced new projects, including restarting two blast furnaces, it told the fact-checking website PolitiFact that it had no new announcements to make regarding any new mills. Trump tweeted Thursday that contrary to GM’s plans, “auto companies are pouring into the U.S., including BMW, which just announced a major new plant,” adding that “The U.S.A. is booming!”BMW CEO Harald Krueger said on Tuesday that the company was mulling a second manufacturing plant in the U.S., though no formal announcement has been made.Article originally published on POLITICO Magazine]]>
Lingering uncertainties surrounding Section 232 tariff exemptions pose as risk to the American steel industry.
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The Trump administration's gradually softening tariff stance is bad news for domestic steel makers.
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