US firms seeking Trump’s steel tariff waiver face a backlash
By RICHARD LARDNER
Monday, July 30
WASHINGTON (AP) — U.S. companies seeking to be exempted from President Donald Trump’s tariff on imported steel are accusing American steel manufacturers of spreading inaccurate and misleading information, and they fear it may torpedo their requests.
Robert Miller, president and CEO of NLMK USA, said objections raised by U.S. Steel and Nucor to his bid for a waiver are “literal untruths.” He said his company, which imports huge slabs of steel from Russia, has already paid $80 million in duties and will be forced out of business if it isn’t excused from the 25 percent tariff. U.S. Steel and Nucor are two of the country’s largest steel producers.
“They ought to be ashamed of themselves,” said Miller, who employs more than 1,100 people at mills in Pennsylvania and Indiana.
Miller’s resentment, echoed by several other executives, is evidence of the backlash over how the Commerce Department is evaluating their requests to avoid the duty on steel imports. They fear the agency will be swayed by opposition from U.S. Steel, Nucor and other domestic steel suppliers that say they’ve been unfairly hurt by a glut of imports and back Trump’s tariff.
U.S. Steel said its objections are based on detailed information about the dimensions and chemistry of the steel included in the requests. “We read what is publicly posted and respond,” said spokeswoman Meghan Cox. Nucor did not reply to requests for comment.
The 20,000-plus waiver applications that the Commerce Department has received illustrate the chaos and uncertainty ignited by Trump’s trade war against America’s allies and adversaries. It’s a battle that critics of his trade policy, including a number of Republican lawmakers, have warned is misguided and will end up harming U.S. businesses.
Trump and European leaders agreed this past Wednesday not to escalate their dispute over trade, but the tariff on steel and a separate duty on aluminum imports remains in place as the U.S. and Europe aim for a broader trade agreement. The metal taxes would continue to hit U.S. trading partners such as Canada, Mexico and Japan even if the U.S. and the EU forge a deal.
Miller bristled over insistence by Nucor and U.S. Steel that steel slab is readily available in the United States. “That’s just not true,” he said.
His company isn’t the only one looking overseas for a product described as being consistently in short supply. California Steel Industries, a mill east of Los Angeles in Fontana, described the slab shortage as “acute” on the West Coast and declared that its waiver request is critical to its survival.
Aiming to rebuild the U.S. steel industry, Trump relied on a rarely used 1962 law that empowers him to impose tariffs on particular imports if the Commerce Department determines those goods threaten national security. He added a twist: Companies could be excused from the tariff if they could show, for example, that U.S. manufacturers don’t make the metal they need in sufficient quantities.
But there are hurdles to clear on the path to securing an exemption. A single company may have to file dozens of separate requests to account for even slight variations in the metal it’s buying. That means a mountain of paperwork to be filled out precisely. If not, the request is at risk of being rejected as incomplete. All this can be time-consuming and expensive, especially for smaller businesses.
The requests are open to objections. The Commerce Department posts the exemption requests online to allow third parties to offer comments — even from competitors who have an interest in seeing a rival’s request denied. But objections are frequently being submitted just as the comment period closes, undercutting the requester’s ability to fire back.
Willie Chiang, executive vice president of Plains All American Pipeline, told the House Ways and Means subcommittee on trade last week that his company had no opportunity to respond to objections that contained “incorrect information” before the Commerce Department denied its exclusion request. Chiang didn’t say who submitted the inaccurate information.
“The intent here is to restrict imports on a broad scale,” said Richard Chriss, executive director of the American Institute for International Steel, a free trade group opposed to tariffs. “It wouldn’t make sense from the administration’s perspective to design a process that readily granted exclusions.”
The Commerce Department declined to comment for this story.
Department officials have so far made public only a small number of their rulings.
An analysis of the numbers by the office of Rep. Jackie Walorski, an Indiana Republican and one of the most vocal opponents of the steel tariff on Capitol Hill, shows that 760 requests have been approved while 552 have been denied. The department hasn’t yet approved a waiver request that triggered objections, according to Walorski’s review.
The congresswoman’s office also examined the more than 5,600 publicly available comments and found they were submitted on average about four days before the end of the 30-day comment period. More than 50 percent of the comments weren’t delivered until 48 hours or less before the comment window closed. It took department an average of nine days to post comments online after receiving them, according to the analysis. The most prolific commenters were Nucor and U.S. Steel with 1,064 and 1,009, respectively.
A waiver request Seneca Foods Corporation submitted for tin-plated steel it had already agreed to purchase from China was among the denials. U.S. Steel had objected, calling the tinplate a “standard product” that’s readily available in the United States. In fact, U.S. Steel said it currently supplies the material to Seneca Foods, the nation’s largest vegetable cannery.
The New York-based Seneca Foods declined to comment. But in its waiver application, the company said domestically made tinplate “is of inferior quality to imported material.” Seneca Foods also said it’s unclear, at best, if U.S. suppliers have the ability or willingness to expand their production in the long term to meet the company’s annual demand for the material.
Philadelphia-based Crown Cork & Seal, a manufacturer of metal packaging for food and beverages, submitted a sharply worded attachment to its waiver application that anticipated push back from domestic manufacturers. American steel mills, the document said, cannot meet aggregate demand for tinplate and have no plans to increase their capacity.
“We anticipate the U.S. mills will attempt to rebut this statement when they object to this exclusion request, but we encourage the Department of Commerce to see through their manipulative attempt to exploit the rules of the exclusion request process,” the application said.
Daniel Shackell, Crown Cork & Seal’s vice president for steel sourcing, said he’s not optimistic about the company’s chances of getting all 70 of its waiver requests approved. Eight have been granted so far primarily because the metal specified in those requests is not made in the United States. Twelve others have been denied, leaving 50 still to be decided.
“It’s hard not to interpret that the Commerce Department wants domestic suppliers to have an edge,” Shackell said.
Jay Zidell, president of Tube Forgings of America, a small company in Portland, Oregon, said he’s filed 54 exclusion requests and U.S. Steel has objected to 38 of them. U.S. Steel declared it is “willing and ready to satisfy” Tube Forgings’ demands for carbon steel tubing. But Zidell said the comments ignored past problems with metal quality and workmanship that led his company to sever a prior relationship with U.S. Steel.
Still, he’s worried the Commerce Department won’t approve all of the requests. Tube Forgings already has spent $600,000 on tariffs, he said, and may be on the hook for much more than that.
“The entire system is just screwed up,” Zidell said.
Opinion: Trump’s Tariffs Will Negatively Affect the Vaping Industry
By Michael McGrady
President Trump pleased the country’s millions of e-cigarette smokers by ousting a surgeon general who opposed vaping for public health concerns in 2017. That surgeon general, Vivek Murthy, was supposedly dismissed for a controversial report on the effects of e-cigarette use. Several industry publications and pro-industry science groups challenged this report citing that Murthy published purposefully negative findings. With such a move, Trump won praise among e-cigarette users and industry leaders. But, that praise could soon vanish.
As a part of Trump’s global trade war, the administration has proposed levying duties on an additional $16 billion of imported products from the People’s Republic of China. Given that most vaping devices are manufactured in China and are targeted products, Trump’s proposed 10 percent to 25 percent levy could threaten the growing industry.
Bloomberg’s Mark Niquette and Matthew Townsend covered this topic in an excellent expose published July 20. Niquette and Townsend report that Trump’s tariffs on vaping and e-cigarette devices from China could diminish American jobs and close various small businesses.
First, it’s not a surprise that vaping has become a billion-dollar industry. The Vaping Technology Association represents more than 600 manufacturers, wholesalers, distributors and retail shops all over the world, signifying that this industry is a global market. Large multinational tobacco giants like Altria, Reynolds American, Philip Morris and Imperial Brands also play in this market. But, the majority of these firms are small businesses. There are more than 10,000 vape shops all over the United States.
Due to a volatile regulatory climate in the United States attributed to the Food and Drug Administration, most manufacturing is done overseas. According to the Bloomberg report, industry conditions are so toxic that there are “no realistic prospects for anyone to open a factory in the U.S.,” until 2022. At that point, the FDA would have determined which vaping products are approved for sale within the United States under a defined national regulatory regime. Even at this point, chances of a sustainable market are relatively bleak.
Chinese manufacturing thus becomes the only market-viable option for American distributors and sellers. Americans are the global leaders in creating e-liquid for vape products; given this market climate, the only vape imports coming to the United States are overwhelming sourced to manufacturers in China.
The Government Accountability Office reports the United States earned $9 million in tariff revenue on $342 million of imports in 2016. Imports from China accounted for 91 percent, or $313 million, of overall imported products. Simply put, most of the industry’s imported products — vape devices, parts and components, and non-American made e-liquid — are sourced to Chinese manufacturers.
Sixty percent of all related imports are e-cigarette and vaping devices, 32 percent are parts and components, and a remaining 9 percent is e-liquid. The same GAO report also indicates that at least 98 percent of customs value for these devices derives from trade with Chinese firms.
With this data, the 25 percent levy on vaping devices will add to current tariff rates between 1.9 percent to 6.5 percent of dutiable customs values of imports from China and 40 other countries. Proposed tariffs on components range from 10 percent to 25 percent.
According to the presented data and calculations factoring in Trump’s proposed levies, the existing market will hit a negative, downward curve if tariffs are enacted. This is troubling. The vaping industry is expected to exceed $61 billion in 2025 with an average compound annual growth rate of 20.8 percent over the next 10 years. Trump’s trade war could hinder this ambitious growth.
Going back to the effects on small businesses within this industry, Trump’s tariffs could also shut down an entire segment of the American market. Given the slim margins of running a vape shop, a tariff levy could shut down entire chains.
Gregory Conley, the president of the American Vaping Association, said in testimony to a panel of the U.S. Trade Representative’s Office that “a rapid rise in the tariffs assessed on vaping products will only result in a tax increase on American businesses and consumers.”
“Worse, it will narrow the price differential between combustible cigarettes and vaping products, which will discourage adult smokers from switching to these harm reduction products,” Conley said.
Conley further argues that the tariffs add to a state of growing uncertainty thanks to the FDA’s 2022 regulatory goal. According to some projections, FDA’s deeming regulations and their proposed effectivity date could force the closure of 90 percent of all domestic e-liquid producers. Tariffs are ultimately another punch in the gut. Regardless of where you stand on vaping, all of Trump’s duties and tariffs threaten far more than just a few global competitors. Trump has justified his massive trade war — started by washing machines, of all things — as a means to protect intellectual property. In no way does Trump’s new round of tariffs or past levies do that.
Competitive Enterprise Institute senior fellow Ryan Young agrees.
“Instead of punishing intellectual property theft, the Trump tariffs will hurt American consumers and producers who had nothing to do with IP theft,” Young argued last month. In addition to hurting American consumers, Trump has ruined the institution of free trade by levying a series of de facto taxes on said consumers. In the immediate case of e-cigarette and vaping devices, mountains of academic work support the sentiment that these tariffs are taxes.
University of Illinois-Chicago scholars Jidong Huang, John Tauras and Frank J. Chaloupka published research in the scholarly journal “Tobacco Control” in 2014, directly attributing tariffs and taxes on these products as a diminishing factor to overall sales.
“Policies increasing e-cigarette retail prices, such as limiting rebates, discounts and coupons and imposing a tax on e-cigarettes, could potentially lead to significant reductions in e-cigarette sales,” they concluded. Provided that this research does approach the topic from a public health standpoint and addresses concerns that challenge the industry, the point remains.
Tariffs, in general, are regressive taxation methods that harm all components of the direct and indirect industry. As scholar Robert W. McGee wrote in a 1999 piece for the Journal of Accounting, Ethics & Public Policy, “Tariffs are a form of sales or excise taxation in the sense that they force people to pay more for a product than would be the case in a free market.”
Trump has proven himself a hypocrite and must attest for his verbose politicking at the expense of the American taxpayer, consumer, and — above all — his support base. These proposed levies could also destroy the meteoric growth of recent years in a wildly pro-Trump industry.
ABOUT THE WRITER
Michael McGrady, a political consultant, is the executive director of McGrady Policy Research. He wrote this for InsideSources.com.
Opinion: Getting the Vapors Over Vaping
By Robert Graboyes
To this lifelong non-smoker, using electronic cigarettes (“vaping”) seems like a desirable and effective tool for weaning nicotine addicts off the toxic clouds of smoke with which they fumigate their lungs. I do understand why an educated observer might disagree — less so why the issue has become intensely partisan.
Smoking has been controversial for centuries. While Sir Walter Raleigh popularized tobacco in England, King James I described smoking as, “A custome lothsome to the eye, hatefull to the Nose, harmefull to the braine, dangerous to the Lungs, and in the blacke stinking fume thereof, neerest resembling the horrible Stigian smoke of the pit that is bottomelesse.”
E-cigarettes, a high-tech creation, were created as a tool for smoking abatement. Evidence suggests they are the single most successful means of weaning smokers off the carcinogen-laced smoke they crave. For vapers, the nicotine arrives via droplets of vapor, often scented with very un-tobacco-like fragrances, such as mango, peppermint, coffee or lemonade. (The well-known carcinogenic effects of smoking come largely from chemicals other than nicotine.)
In particular, e-cigarettes use digital technology to deliver the smoker’s desired nicotine hit far more effectively than delivery mechanisms like nicotine gum and patches. Thus, vaping seems to make it easier to quit smoking than other approaches.
Still, there is controversy. Let’s explore some relevant facts:
First, smoking tobacco poses terrible health hazards for smokers and is likely the largest single cause of preventable deaths. Vaping poses health hazards, too, but far less than those associated with smoking tobacco.
Second, we can categorize several groups whose behavior changes with the introduction of e-cigarettes — in order of desirability. (A) Smokers who shift from smoking to vaping and then quit vaping. (B) Smokers who shift from smoking to vaping. (C) Non-smokers who shift from abstinence to vaping. (D) Non-smokers who shift from abstinence to vaping and then proceed on to smoking.
Third, people have subjective tradeoffs among the four (A), (B), (C), and (D) categories based in part on their perceptions of the relative health hazards of smoking and vaping.
If you think e-cigarettes move lots of people into categories (A) and (B) and very few into (C) and (D), then you probably think vaping is a good thing. If you think very few will use e-cigarettes as an exit ramp — (A) and (B) — and lots will use them as an entry ramp — (C) and (D) — then you probably oppose e-cigarettes.
Then there are the subjective aspects. Smith and Jones might agree that vaping induces 10 smokers to shift to vaping for every one nonsmoker induced to vape. Smith, though, might argue that one nonsmoker-to-vaper is too high a price to pay for those 10 who go from smoking to vaping (particularly if the one is a minor). Jones, in contrast, might see that 10-to-1 ratio as an acceptable tradeoff.
One of the most contentious public policy issues is the range of fragrances. E-cigarette vendors argue that they help smokers lose their taste for tobacco. (Vapers in my office confirm to me that after using the aromatic blends for a while, the smell of tobacco becomes repugnant.) Others, though, argue that the sweet flavors attract nonsmokers — especially those too young legally to smoke or vape.
To repeat, I tend to favor broad use of vaping for smoking cessation. My logic is as follows: The cost of smoking in terms of human misery is enormous. Vaping seems to be the most effective route to smoking cessation. Vaping doesn’t appear to attract a terribly large number of nonsmokers — including the young, and the same goes for the aromas.
I find the data to be compelling, but I understand how one might conclude otherwise.
What is more mysterious is how this particular issue has degenerated into one more hyperpartisan conflagration. With some exceptions, conservatives/Republicans champion vaping and liberals/Democrats hate it. For me, the left’s opposition is all the more peculiar, given their widespread support for dispersing condoms, methadone and clean needles for harm reduction. The same A-B-C-D logic applies to these programs as well as to vaping.
The best explanation for this sharp ideological/partisan divide is one I use with increasing familiarity, “It’s 2018.”
ABOUT THE WRITER
Robert Graboyes is a senior research fellow with the Mercatus Center at George Mason University, where he focuses on technological innovation in health care. He is the author of “Fortress and Frontier in American Health Care” and has taught health economics at five universities. He wrote this for InsideSources.com.