The Effects of 2002 Steel Tariff

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The Effects of 2002 Steel Tariff

• By J.R. Reynolds

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What is a tariff?

• A tax levied on a product when it crosses
  national boundaries
• Specific tariff- a fixed sum of money per
  physical unit of the commodity. (In this case
  steel)

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Why this tariff was imposed.

• Steel industry was in a tailspin after financial
  crisis swept through Asia, Latin America, and
  Russia in 1997
• Effects of Asian currency crisis was from 1997 to
  2001, caused prices for U.S steel to tumble more
  than 30 to a 20 year low.
• Caused more than 30 U.S. steel firms to file for
  bankruptcy, and tens of thousands of jobs were
  lost.

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Hypothesis

• This tariff will actually do more damage than
  good. Could possibly lead to a shortage of steel
  in the U.S, cause smaller manufacturers to fold
  due to increases in price, and possibly ignite
  trade war between U.S. and major trading
  partners.

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Breakdown

• Tin mill steel-30
• Flat steel products-30
• Hot-rolled cold finished bar-30
• Car products-13
• Stainless rod-15
• Stainless steel wire-8
• Rebar (used in construction)-15

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Reactions

• The European Community, compiled of 15 European
  Nations threatened to impose 300 million in
  duties, ranging from fruit juices to textile
  items in retaliation.
• Britain also threatened to impose a tariff on
  imported citrus from Florida.
• Brazil, Norway, Japan, and Switzerland were also
  not happy. (WTO)

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Problems in the U.S.

• Pryor to this tariff in 2001, 4 major producers
  were forced to shut down, which accounted for
  about 10.
• Producers were forced to raise prices, due to the
  new demands for steel.
• Companies simply can not keep up with the demand
  for steel.
• Some manufacturers turned to Canadian factories
  for cheaper prices. Canada exempt from tariff
  because of NAFTA.

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Quality Issues

• Steel that would not be accepted a year ago is
  now accepted.
• With limited supplies some have no choice, but to
  work with what they can.

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• U.S. producers of stainless steel sheet strip/
  largest producer in the U.S., but not included in
  tariff, were hit with a drop in consumption and
  increase in imports.
• Consumption of U.S. steel dropped 8, while
  imports increased by 6.
• Imports now control approximately 20 of
  stainless steel market in the U.S. which is up 3
  percent from 2002.

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• Stainless steel rod industry saw imports decrease
  by 34, while the demand for stainless steel rod
  dropped 18.
• Stainless steel bar market saw imports drop 8,
  while consumption of stainless steel bar
  decreased by 6. Yet imports still control 40
  of the market down one percent from the previous
  year

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Conclusion

• Questions
• Comments

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Conclusion

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