HOLMESTRAND, Norway — President Trump’s tariffs on imported steel and aluminum were supposed to revitalize American producers and handicap foreign competitors. What happened shows the perils of using trade policy to revive struggling industries.
The tariffs, which took full effect a year ago, have spurred a handful of domestic investments and the reopening of a few idled plants. And the metals industry has added a few thousand additional jobs.
But the tariffs have also forced Americans to pay more for steel and aluminum than other consumers around the world. American- and foreign-owned companies operating in the United States have had to scramble to navigate a complex government process to source materials they need to manufacture their products.
Mr. Trump abruptly removed the tariffs on imports from Canada and Mexico, narrowing the amount of imported metals subject to the 25 percent tax on steel and 10 percent on aluminum.
The metals tariffs, however, remain in place on imports from geopolitical rivals like China and Russia, as well as on allies like Europe and Japan. But analysts suggest their power to rebalance global production, in order to favor American workers, has effectively peaked.
Mr. Trump does not see it that way. He has repeatedly hailed the tariffs as reviving iconic blue-collar industries. “To protect our national security, we also imposed a 10 percent tariff on foreign aluminum and a 25 percent tariff on foreign steel,” he told a crowd in Pennsylvania recently, “and what that’s done for your aluminum and steel in this country is incredible.”
Industry statistics and stock prices suggest a more complicated story. Shares of America’s largest aluminum and steel makers have plunged over the last year. There are fewer aluminum production jobs in the United States than a year ago, while steel mills have added only a few thousand jobs. In April of this year there were 381,000 Americans working in the primary metals industry, which includes steel and aluminum. That’s up from 376,400 a year ago — a 1.2 percent gain — and down from 398,000 in April 2015.
Steel production barely increased over the past year. Aluminum production has risen more, but it remains more than 40 percent down from where it was in 2015. The United States produced 890,000 metric tons of aluminum in 2018 — barely more than Iceland, well below Norway and less than 3 percent of the output of China.
Executives at foreign-owned metals producers, which were supposed to bear the brunt of America’s tariffs, say Mr. Trump’s levies have largely been an annoyance and, ironically, a hindrance to their operations in the United States. They say tariffs have not changed the competitive landscape in the global aluminum or steel business.
“The main effect in the markets seems to be that aluminum is becoming more expensive for the U.S. consumer” relative to people elsewhere around the world, said Kathrine Fog, the head of corporate strategy and analysis for the Norwegian aluminum giant Norsk Hydro, in an interview in the company’s Oslo headquarters.
Ms. Fog and other Hydro executives say that on their list of worries over the last year, Mr. Trump’s trade policies ranked well below cyber attack, South American courts and executive turnover. The only harm they have suffered from the tariffs, which still apply to Norway and other European allies of the United States, has come through the aluminum extrusion plants they operate in the United States, which import some of their source materials from Canada. Lifting the tariffs on Canada will ease that pain, officials say.
At the end of last year, after months under the tariffs, the United States still produced barely two-thirds the aluminum of Norway — a country with just 5 million residents — according to the United States Geological Survey. It produced one-tenth the amount of raw steel as China, and its steel output was still growing slower than China’s.
Since Mr. Trump imposed metal tariffs on trading partners last spring, aluminum prices worldwide have fallen nearly 20 percent. That is attributable in large part to China’s government-supported smelters, which poured additional supply into the global market, as well as falling demand for aluminum in Europe and other large economies. Production costs also declined worldwide.
Aluminum prices in the United States have fallen substantially less, by about 9 percent, according to data compiled by Harbor Aluminum, an industry analysis firm. The premium that American consumers pay for aluminum, compared to what others pay on the global market, has doubled since the administration began the government investigation in 2017 that ultimately authorized the metal tariffs. Today, American manufacturers that use aluminum in their products pay 22 percent more for the metal than their international competitors, including countries like Norway and Canada.
Primary aluminum production rose 20 percent in the United States in 2018, compared with 2017, according to the United States Geological Survey. In January of this year, it was up 40 percent from January 2018. The surge was the result of three plants restarting capacity after tariffs were announced. That included a move by Century Aluminum, a large American manufacturer, to restart an idled plant in Kentucky.
No companies have announced plans to build new primary aluminum smelters in the United States, and analysts don’t expect them to, even if the tariffs remain indefinitely, because high American electricity costs make such investments unattractive. Century’s revenues climbed last year but its earnings declined, and it has lost more than 50 percent of its stock price since June 2018. A rival, Alcoa, has posted only slightly better results.
Stock prices have also fallen at the steel titans ArcelorMittal and U.S. Steel, which delighted Mr. Trump with its decision last year to restart idled blast furnaces in Granite City, Ill. Mr. Trump visited the plant in July 2018.
Proponents of his tariffs, like Scott Paul of the Alliance for American Manufacturing, call the move evidence that “America’s steel towns are back to work.”
Broader data are less encouraging for the industry and its workers. The geological survey reported earlier this year that there were fewer workers in steel foundries and mills at the end of 2018 than at the end of 2017.
Hydro offers an unusually clear window into the effects of the tariffs, because it competes against American companies, but also operates a string of extrusion plants in the United States, which take smelted aluminum and fashion it into specialized parts for automakers and other industries.
Norway is Europe’s largest aluminum producer, buttressed by cheap and abundant hydropower, like the waterfall that flows to the fjord here in Holmestrand, which powers the rolling mill that has operated for more than 100 years.
The only tariff damage Hydro has suffered has come at its American plants, which have struggled to source the raw, and often imported, metal they need to fashion specialty alloys for industrial clients. Those plants aren’t primary metal producers, like many of Hydro’s other operations around the world. They’re buyers of aluminum as an ingredient in their alloys, which means they’re paying higher prices on the American market for raw materials.
The company had to pay an additional $7 million last year to import aluminum from one of the Hydro’s smelters in Canada to an extrusion plant in the United States, for example. It ate those losses. In other cases, Hydro executives say they have passed the higher price of primary aluminum straight on to their customers, some of them outside the United States, and they’ve suffered for it.
“We’ve definitely lost business because of the tariffs,” said Charlie Straface, who heads Hydro’s North American extrusion operations, in a phone interview. “The business moved to the country where the customer is.”