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The Effects of 2002 Steel Tariff

The Effects of 2002 Steel Tariff. By: J.R. Reynolds. 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). Why this tariff was imposed.

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The Effects of 2002 Steel Tariff

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  1. The Effects of 2002 Steel Tariff By: J.R. Reynolds

  2. 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)

  3. 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.

  4. 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.

  5. 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%

  6. 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)

  7. 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.

  8. 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.

  9. 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.

  10. 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

  11. Conclusion • Questions • Comments

  12. Conclusion • Questions • Comments

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