Trump Says Steel Was ‘Dead’ Before His Presidency. It Wasn’t.
(Bloomberg) -- President Donald Trump claimed on Wednesday that the U.S. steel industry was “dead” before he took office and that his predecessor Barack Obama had “shut it down.”
It wasn’t, and Obama didn’t.
The remarks came during an unusual question-and-answer session with Trump’s top economic adviser, Larry Kudlow, at the White House.
“One of the things I’m very proud of is the steel industry,” Trump told Kudlow. “The steel industry was dead. It was as dead as a doornail. We weren’t going to have a steel industry in two years.”
In fact, U.S. steelmakers Nucor Corp. and Steel Dynamics Inc. were two of the healthiest commodity companies in the world before Trump took office and imposed 25 percent tariffs on foreign steel imports. Trump appeared to conflate steel with another industry, aluminum, which was indeed suffering before the president imposed a 10 percent tariff on imports of that metal.
“It used to be our great industry,” Trump continued. “United States Steel was our biggest company many years ago and there was nothing even like it. It was a juggernaut.”
U.S. Steel Corp. was an unhealthy company as recently as 2015, when many analysts questioned its viability. It still carries a lot of debt on its balance sheet, runs aging plants and is further hurt by labor contracts that many of its competitors don’t have to deal with. Lately, things are improving as the steelmaker generates more cash amid rising prices and tariffs that are keeping overseas competitors at bay.
“These industries, it’s incredible what’s going on,” Trump said. “U.S. Steel is building many plants and expanding many plants. Nucor is building -- and these are new plants in many cases. These are big beautiful plants.”
Nucor is building plants that it had already planned before Trump’s tariffs and some laid out after the levies were announced. U.S. Steel is indeed expanding production, in part due to Trump’s tariffs.
“The previous administration shut it down -- for environmental reasons, they said, but nobody quite got it,” Trump said. “And they just shut it down and it was collapsing.”
The Obama administration didn’t impose any significant new regulations on steel manufacturers.
“Now, if you just look at it from the standpoint of defense -- if you don’t have steel, you don’t have defense,” Trump said. “You’re not going to be buying your steel from a foreign country, in case you have a problem, which hopefully we won’t, ever.”
The military’s demand for steel and aluminum amount to only about 3 percent of total U.S. production, according to a memo Defense Secretary James Mattis wrote last year urging Commerce Secretary Wilbur Ross to impose only “targeted” tariffs on imports -- advice he and Trump ignored.
“You look at what the plans are for U.S. Steel and for Nucor and so many others where they’re building plants,” Trump continued. “And eventually, those prices are going to end up being lower, because everything is going to be end up being made here. We’re taking the iron ore from here, we’re taking everything right from our mines. ”
Trump’s hopes may be misplaced. Steel prices in the U.S. are higher than anywhere else in the world in large part due to the tariffs Trump passed. Additionally, only integrated steelmakers need iron ore, while electric arc furnaces use scrap metal. U.S. Steel has its own ore mines in the U.S. Cleveland-Cliffs Inc. is the only iron ore producer in the U.S., and it already feeds many of the biggest integrated steelmakers in the U.S.
“The other thing is the quality of the steel is much better,” Trump concluded. “Because we were having garbage dumped on our shores. It was sand, it was all sorts of rock in it, it was bad steel. It wasn’t structurally good. And we are now having, we’re creating a fine quality steel, which to me is a very important thing. ”
He’s right that American steel is of high quality. Even importers wouldn’t sell low quality material simply because it’s bad business. In fact, a lot more of the mills globally are newer than U.S. mills.
©2018 Bloomberg L.P.