As a Kentucky mill shutters, steelworkers see the limits of Trump’s intervention

My Comments: This is a fascinating, and troubling, article that reveals two things to me.

The first is that what we hear and read about at the national level has an abstract reality that as individuals we can usually only experience intellectualy. We may like it or we may hate it, but our response is a function of prior belief and whether it conforms to our existing understanding.

The second is that those same actions exercised on a national level can have a profound effect on people just like us, who might be said to live and breath in the wrong place at the wrong time. It now becomes a visceral experience from which you cannot escape and is no longer an abstract intellectual observation.

These words from Jeff Stein describe, on one level, the efforts by Trump to “make America great again”, which in all fairness was a rational decision. But it’s one that got caught up in unintended consequences because it was not well thought out or fully understood, even if that were possible. Regardless of what you may have wanted to happen, on balance at one level it was the wrong thing to do.

The last line says it all; “When you go from earning $100,000 a year, or $70,000 a year, to making $10 an hour — well, it’s obvious,” Miller said. “You can’t afford spaghetti and meat sauce for $19.”

By Jeff Stein  \ Oct. 25, 2019 \ https://tinyurl.com/y3c6olf4

ASHLAND, Ky. — Brenda Deborde cried throughout her 16-hour shift at the steel plant here when she received official notice this August that her job was being cut.

Deborde had hoped President Trump’s tariffs could revive this once-mighty mill on a bank of the Ohio River, which for much of the 20th century formed the center of economic life in this part of Eastern Kentucky.

She and her husband, Matt, had traveled to welcome the president as he went to a rally in nearby Huntington, W.Va., waving their Trump flag and “Make America Great Again” hat to the motorcade from the side of the road.

“We really thought the tariffs were going to turn us around — that things would go back to being the way it was. We thought it could be a kind of saving grace,” said Deborde, 58.

It wasn’t. By the end of this year, she and Matt will lose their jobs at the plant after almost two decades. They aren’t sure what they will do next.

Last year, Trump imposed tariffs on steel and aluminum imports to try to boost domestic production. It appeared to work, briefly, sending company stock prices higher and leading to more hiring and production.

But that boost now appears short-lived. The industry faces strong head winds threatening to undermine one of the president’s central economic promises ahead of his 2020 reelection campaign.

Steel prices — which soared as the tariffs were introduced — have since fallen below where they were at the outset of the trade war, dropping by more than 40 percent since last summer, according to one key metric.

The stocks of the biggest steel companies — which also rose dramatically when the tariffs first came on — have similarly tumbled over the past year, in some cases by more than 50 percent.

They have been hurt by tepid domestic demand for steel production amid a U.S. manufacturing recession and a global slowdown in economic growth, among other things

The sudden unevenness in the sector may risk creating a political vulnerability for the president who pledged to bring manufacturing jobs back to Appalachia.

Trump has said that the substantial collateral damage from his trade war with China, particularly devastating to farmers in the Midwest, is justified in part by the need to revive American steel and bring back steelworkers’ jobs.

The president has continued to boast about the steel industry’s recovery on the campaign stump, taking credit for its revitalization even as warning signs have emerged.

“Steel was dead. Your business was dead. Okay? I don’t want to be overly crude. Your business was dead. And I put a little thing called a ‘25 percent tariff’ on all of the dumped steel all over the country. And now your business is thriving,” Trump said at a rally in August in Monaca, Penn. “Our steel mills are fired up and blazing bright. The assembly lines are roaring. . . . The steel companies are thriving again.”

In a statement, White House spokesman Judd Deere said that more than 5,700 jobs in steel have been added since the tariffs were implemented, resulting in a 2.8 percent increase in steel employment, as well as rising wages for steelworkers. (The White House did not provide a source for this statistic.)

Steel employment has risen slightly since the tariffs, federal data show, but is falling this year and remains well below levels from 2012 to 2014.

“Without those tariffs . . . the steel industry would be in fragile straits,” said Peter Navarro, a top White House trade adviser, in an interview. “The biggest factor driving the slowdown in the U.S. economy, from what should be 3 percent growth to around 2 percent, is a highly misguided Federal Reserve policy that raised interest rates too far and too fast.”

Many companies like AK Steel, the Ashland plant’s parent company, face severe challenges despite the administration’s extensive efforts to insulate domestic steel production from foreign competition.

Analysts say the weaknesses in the global economy, exacerbated by a recession in domestic manufacturing, risk wiping out the U.S. steel industry’s gains from Trump’s tariffs. The administration’s tariffs may have successfully helped curtail foreign competition, analysts say, but steel is being buffeted by softening demand due to these broader economic trends, including a strong U.S. dollar that hurts exports generally.

Demand for steel in the United States grew 2.1 percent in 2018. But this year a slowdown in American construction and automobile production helped diminish demand to just 1 percent, and it is projected to grow just 0.4 percent in 2020, the World Steel Association said earlier this month.

“What has been really disappointing in the last year is business and capital spending — and that has a high steel component. What you’re getting is a softening of domestic demand for steel,” said Gary Hufbauer, an economist at the Peterson Institute for International Economics. “The tariffs are not enough to overcome these head winds.”

As prices have fallen by almost 50 percent since July 2018, purchasers of steel see little incentive to place new orders that may prove less expensive the following week.

The upshot is many American steel companies now find themselves in a precarious position, analysts say, soon after they appeared poised for a major rebound.

After the tariffs were announced, the U.S. Steel Corporation’s stock price jumped from $33 to $45. The company announced it would restart an idled blast furnace in Granite City, Ill., and Trump attended an event to celebrate the reopening.

But about 15 months after that heady moment, U.S. Steel is struggling. Its stock has since slid to just north of $10 per share. Since August, the company has announced it would temporarily lay off up to 200 workers at a plant in Michigan and hundreds more at a plant in Indiana, according to news reports.

Similar stories abound throughout the industry. In September, Bayou Steel in Louisiana abruptly announced it would be laying off close to 400 employees.

“The tariffs happened at a high in the industrial economy, when it was firing on all cylinders, and certainly supercharged prices for several months,” said Phil Gibbs, a steel industry analyst at KeyBanc. “But now there are a lot of markets that feel softer, which is bleeding into the steel industry.”

Initially, steelworkers in Eastern Kentucky and elsewhere had reason for optimism. The major steel companies and their unions had unsuccessfully tried getting several presidents to more aggressively crack down on the “dumping” of foreign steel into American markets. Trump moved quickly to impose the tariffs, justifying the unilateral action on the grounds of national security concerns.

Kendall Kilgore and a handful of other steelworkers gathered in their union hall to watch on March 1, 2018, as Trump met in the White House with Roger K. Newport, the chief executive of AK Steel, and several other leading steel executives.

The Ashland plant, owned by the American Rolling Mill Company in the 1920s, once employed about 7,000 people and set world records for steel production, producing more than a million tons of iron during World War II. Major League Baseball teams came to play games in front of the steelworkers in the 1940s.

The plant expanded to encompass more than 700 acres, the bright flame from its blast furnace — nicknamed “Amanda” — visible far down the highway.

But the plant slowly declined over decades amid foreign competition and as newer plants were built in the United States. In 2015, AK Steel announced the Ashland plant would temporarily halt parts of its operation. About 600 people were laid off.

Trump was elected the next year. Parts of the plant had been idled, but not shuttered, and even the steelworkers who did not vote for the president thought his pledge to enact tariffs might help them reopen. At the very least, they hoped the nearly 300 remaining workers would be able to keep their jobs.

“Everybody here was so excited. I don’t like Trump, but I really thought they would help,” said Kilgore, 48, a union leader who voted for Hillary Clinton in 2016. “Now, I see they didn’t.”

The steelworkers in Ashland, including several who voted for Clinton, do not blame Trump for the closure of the plant. Most said they were grateful that the White House imposed the tariffs, which they considered long overdue, to stem the oversupply of steel in the market from foreign producers. Several believe Trump should have gone further and issued even stricter levies on steel imports.

But many also said that their experience gave them insight into the limits of tariffs for the average worker. Jack Young, a Trump supporter who has worked for 20 years as a pipe fitter at the plant, will lose his job next month. Young requires medication for several heart conditions that costs $6,000 a month and does not know how he will afford it once his health insurance is terminated.

“The tariffs — we thought they’d bring some life back,” Young said. “But they just raised the price of steel.”

Steel prices soared from about $600 to more than $900 as the tariffs were first imposed, according to S&P Global Platts, but have since fallen to about $500.

Many of the Ashland steelworkers also pointed out that Trump’s tariffs have grown weaker as foreign manufacturers have learned how to get around them and, according to data compiled by the steelmaker Nucor, the administration has granted more than 25,000 exclusions that allow imported steel to enter without the tariff penalty.

In a statement, Newport said foreign producers continued to “cheat U.S. trade laws” despite the tariffs, which he blamed for the drop in steel prices. The administration agreed to lift the steel tariffs on Mexico and Canada as part of its new North American trade deal, which remains stalled in Congress.

But the slowdown continues and its impact has spread beyond just steelworkers. Greg Miller opened Alma’s restaurant a few blocks from the AK Steel mill after Miller and his husband moved back to their hometown to serve “what Appalachians think Italian food is,” Miller said with a grin.

But on Oct. 12, a Wednesday, Miller was rummaging through the restaurant’s remaining cutlery, pans, plates, trays and other kitchenware. With cuts at the steel mill reducing his customer base, Miller shuttered Alma’s permanently that Saturday. The couple is not sure where they will end up next.

“When you go from earning $100,000 a year, or $70,000 a year, to making $10 an hour — well, it’s obvious,” Miller said. “You can’t afford spaghetti and meat sauce for $19.”

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