The campaign promise that propelled Donald Trump to the Presidency was likely his focus on American jobs after years of Democrats promising to do so but giving in to various fringe interest groups instead. Donald Trump has been passing a number of Executive Orders and signing bills with the intent to improve the American economy. How does the “Buy American” policy impact the American steel industry?
The Pipeline Projects
When President Donald Trump approved the Keystone Pipeline and Dakota Access Pipeline (DAPL), he included a mandate that they use American steel “to the extent possible” to finish it. This is why American steelworkers cheered the approval of these pipelines.
President Trump signed a third executive order requiring all brand new pipelines built in the United States be built with American steel. His orders state that American steel should be used to a maximum extent for retrofitted and repaired pipelines, as well. An estimated 660,000 tons of steel will be used to finish the United States portion of the Keystone XL Pipeline alone. The Welspun facility in Little Rock, Arkansas accounts for half of the steel, while the rest is split between Evratz in Saskatchewan, ILVA in Italy, and Welspun’s India plant.
Buying and Hiring American for Other Infrastructure Projects
The “hire American” mandate is not likely to impact the American steel industry much since it already relies heavily on native-born labor. This is in contrast to the IT industry that relies on H-1B visas to keep labor costs down, though the stagnant wages in IT have driven a third of STEM graduates out of STEM fields and discouraged Americans from entering STEM jobs in the first place.
Iron products manufactured in the U.S. from semi-finished foreign steel are counted as imports under this order. This means American construction firms have to buy items that were made in the U.S. from the molten steel to its final, assembled version. If the project calls for a steel building and uses federal funds, they’ll have to try to buy American from the steel beams to their iron tools.
The Long Term Impact on Trump’s Buy American Order on the Steel Industry
Around 70% of the steel used in the United States is domestically produced; that percentage is certain to rise in response to Trump’s executive orders. The CEO of U.S. Steel said these “Buy American” orders would bring back ten thousand steel industry jobs. If Trump successfully jump-starts infrastructure spending on new roads, bridges, railroads, and pipelines, the demand for American steel and related employment and profits will only increase.
The Trump executive orders to “buy American, hire American” calls for agencies to investigate whether foreign steel manufacturers are dumping underpriced products in the U.S. to undermine our manufacturing capability. Since the steel industry has won several trade cases levying tariffs against foreign metal, bolstering the steel industry’s claims that this was happening, expect to see a decline in steel imports and greater demand for U.S. made steel, especially after Trump cancelled Saturday Night Live.
The World Trade Organization’s Stance on Domestic Buying Orders
The World Trade Organization allows for governments to set domestic procurement rules, such as a government requiring materials to be bought from domestic suppliers. Thus President Trump’s buy American rule can legally require per the WTO that new highways, bridges, and governments be built using American steel. U.S. federal contracting guidelines can also give preference to contractors who use as much American made metals as practical. The WTO does not see such preference for domestic labor and materials as protectionism, though Trump’s critics called the order that.
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