Three US Tire-Chord Makers Threaten to Close Doors Due to Trump Tariffs

Three tire-cord manufacturers got a push-back in their effort to win trade exclusions from Trump. They threaten closure.

Arkansas Online reports Tire-cord makers with operations in Arkansas threaten closures after bid for tariff exclusion contested.

Bekaert Corp., Kiswire America and Tokusen USA jointly requested blanket exclusion from what they described as "grade 1078 and above wire rod for tire cord" that they import, arguing that the quality of wire rod they require is unavailable from U.S.-based steel producers.

If they can't get access to the imported steel they need, the companies say they will close their operations. Together, they employ 1,500 people at four plants in Arkansas.

"Stated simply, U.S. wire rod producers are incapable of producing grade 1078 and above wire rod to produce tire cord because that grade of wire rod must be produced in basic oxygen furnaces to achieve the strength, cleanliness and other properties to draw the wire rod to tire cord dimensions," according to the companies' legal representative, the Washington, D.C., law firm of Morris, Manning & Martin LLP.

But the Wire Rod Coalition, a trade organization of U.S. producers of carbon and alloy steel wire rod, disagrees and has filed an objection to the request for a blanket exclusion.

Coalition members say they can and do make the same quality steel tire cord without using the basic oxygen, or blast, furnaces that Bekaert, Kiswire and Tokusen say their steel requires. "Grade 1078 and above tire cord wire rod can be and is produced using electric arc furnace steel," the coalition's legal counsel, Kelley Drye & Warren, said in a formal objection.

Image from Rubber and Plastic News.

Trade Foolishness

People buy into that notion because it is repeated often enough.

But whether or not such steel is available in the US, those manufacturers will face much higher costs.

The same applies to every company in the US that uses steel or aluminum.

Job Reality

Employment is down 57.7% while production is up 7.7%. Those steel jobs are lost and gone forever. It's called productivity.

Jobs at Risk

There are about 6.5 million workers at manufacturers that use a lot of steel, but only 140,000 steelworkers, says Moody’s.

To protect 140,000 jobs Trump is willing to put 6.5 million workers at risk.

How stupid is that?

It's so stupid US Steelworkers do not even support Trump's latest play with Mexico and Canada.

Spotlight On Cars

Trade War Math

Trump Madness in Numbers

  • 6.5 million US employees benefit from lower prices.
  • Only 140,000 employees benefit from tariffs.
  • 325 million US consumers benefit from lower prices.
  • Cheap steel is to the benefit of US exporters if the EU applies tariffs and the US doesn't

If, as claimed, China is dumping steel, it is to our benefit at China's expense!

Only economic fools cheer Trump's trade madness.

Addendum

The above image is from Steel Industry Productivity with thanks to reader "Thimk" (not a typo).

A Bloomberg News story from June 20, 2017 offered a fascinating look at how a modern plant can now produce high-quality steel with few workers.

The plant in Donawitz, a two-hour drive from Vienna, needs all of 14 employees to make 500,000 tons of steel wire a year. The same mill in the 1960s would have needed as many as 1,000 workers to produce a similar amount albeit of lesser quality.

“We have to forget steel as a core employer,” Voestalpine CEO Wolfgang Eder told Bloomberg.

The policy point is that Mr. Trump’s tariffs are trying to revive a world of steel production that no longer exists. He is taxing steel-consuming industries that employ 6.5 million and have the potential to grow more jobs to help a declining industry that employs only 140,000.

Related Articles

  1. How to Not Sell Cars: More Steel Tariffs Coming Up
  2. National Security or Insecurity? Trump Tariffs Will Cost 195K to 624K Jobs
  3. Foolishness of Trump's Steel Tariffs in One Image
  4. Pandora's Box: Another Look at Steel Tariffs
  5. NAFTA is Dead: Trump Seeks Separate Agreements With Mexico and Canada

By the way, this setup is eerily similar to events leading up to the start of WWI. For discussion, please see Europe's Nationalism and Trump's Trade Policies Look Like WWI Prelude.

Mike "Mish" Shedlock

Comments (29)
No. 1-25
MarkBC
MarkBC

What if one country is temporarily dumping some commodity just to put the target country's companies out of business, then will raise the prices enough to make up the original losses and then some? Sure the source country is losing initially but not in the long run.

thimk
thimk

Good call - the F.R.E.D chart says it all . here is additional supporting documentation. We switched to high tech "mini mills" that use scrap. The question arises, though, do we make enough domestic steel to support a large war effort similar to WWII. We are down 1/3 production of 1973 peak of 137 million metric tons to 87 million tons. But current highly productive steel making is not a big job creator.

Carlos_
Carlos_

Mish said: " People buy into that notion because it is repeated often enough." That is a feature not a bug. Guess who used that a lot? The author of these: "If you tell a big enough lie and tell it frequently enough, it will be believed." "Make the lie big, make it simple, keep saying it, and eventually they will believe it."

hmk
hmk

At least this may cause the inflation that the fed wants so bad. I have spoken with an owner of a tier 1 automotive supplier and his distaste for China is off the charts. I cant remember all the trade issues he has had with the Chinese bottom line is they are horrible to deal with. He had to build a plant in China at the demand of of one of the big three, that replaced a profitable plant elsewhere in Asia and stated it was never profitable. Between govt coruuption, dishonesty and labor corruption making the parts was a nightmare. He finally closed the plant after the agreement terminated and left. They ship inferior parts to the US deliberatly made against specifications and when their parts fail there is no recourse . You have to sue in China and even if you are fortunate enough to get a favaorable verdict you won't collect. Trade wars are not a good idea but when the Chinese engage in gangster business practices I don't see why it isn't a good idea for the US to attempt to get better trade deals. I am hoping Trumps threats are just a bargaining tactic and don't come to fruition but will secure better trade arrangement around the world,