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.

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.

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.

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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
No. 1-25
sachvik
sachvik

Realist - I find your views on this subject very refreshing. Completely agree when you say that tariffs will not work for Trump as they address the jobs of the past; if outsourcing does not get them, automation will! Question: with the exorbitant cost of upskilling (education), how is the USA to continue developing? Here's an article about a community trying to make the gig economy (the current employment fad in the tech industry) work for them and failing: https://www.theatlantic.com/business/archive/2018/06/gig-economy-inequality/560942/ The problem for me continues to be that technology is taking away all these old jobs and is not replacing them fast enough any more. Irrespective of people's assertions - technology takes away jobs and replaces them with "the same number" of higher end jobs, I find that hard to believe. My observation in the business world is that jobs get automated, and convert very quickly into 2 categories:

  1. Very few high-end, well-paying jobs, and
  2. The vast majority, of low-level, irregular (think gigs, 0-hour contracts) low-paying jobs. It is extremely difficult to break out from the latter category to the former, partly because people in the latter category cannot invest the time and money to learn the skills for the former, and partly because of the increased competition for such jobs...
Thalamus
Thalamus

Automation will continue to decimate employment numbers worldwide. Resource extraction from other countries is favorable to the US protecting our nations respurces. That being the case, we must demand balanced trade with US trade partners and not allow worldwide conglomerates to control congress; which looks the other way on trade deals that benefit their bottom line at the expense of the US worker. This is the source of the problem—globalist corporations. Sure things make sense from the globalist perspective but their gain is our children’s’ future debt that lowers their standard of living to the point of eventual impoverishment. Creating perpetual trade deficits destroys our nations future slowly but surely. Any good leader would seek balanced trade but maximize foreign resource extraction. This maximizes our countries net worth and per capita value.

Realist
Realist

RonJ. It’s not China. It’s not trade. It’s automation.

hmk
hmk
Realist
Realist said: It is difficult to know how to respond to the many comments. It’s like watching a magician perform. It’s all about misdirection. Everyone is looking at the same thing, but not looking where they should be. The original story is about the impact of tariffs, and gives an example of how they actually hurt one business (manufacturing) to supposedly help another (steel). Trump supporters actually think that he is doing a good thing with Tariffs, while everyone else realizes that this will hurt far more US businesses and workers than it will help. Trump wants tariffs because he believes the US has lost jobs because of bad trade deals. As Mish always points out, job loss has been the result of automation, which has been changing the job market for hundreds of years. The effect of trade, is a rounding error by comparison. Trump is fighting the wrong war, and in the process he is alienating America’s friends and allies, and he will hurt far more Americans than he will help. In addition, there are currently more available job openings in the US, than there are unemployed people to fill them. As I always say, the US does not have a trade problem, it has a skills problem. There are simply too many Joe six-packs who lack the education and skills needed to fill those empty jobs. If Trump wants to have Joe gainfully employed, he needs to get Joe the training that he/she needs in order to be a productive worker. (Side note: lack of skills among marginal workers is the main reason for low productivity growth over the last decade, in spite of continual improvements in technology.) Some of the comments are about how poorly the US economy is performing, as it continues its slow 2% growth. There are many reasons why the US can’t achieve higher growth rates (including personal, corporate and government debt levels), but another impediment is a lack of skilled workers to fill those empty jobs. Many businesses in the US would love to expand to meet demand, but can’t, because they can’t find the skilled workers needed. So even if Trump somehow magically creates millions of new jobs, who is going to fill them? I can guarantee that any new jobs created are not going to be filled by Joe. The entire trade and tariff thing is all a waste of time, and I suspect that the only thing that Trump will create with it is harmful to the US.

I wonder why more emphasis on getting skilled trade training isn't be pushed. In other countries like Germany they have a data bank on what skills are needed and in high school students are separated into a trades like educational track and the others into a college bound track. If someone wants to go to college instead of a skilled trade they still can.

stillCJ
stillCJ

Editor

At the G6+1 today Trump surprised the others by suggesting they all get rid of all tariffs and price supports. What do you think of that Mish? Personally, I love The Donald's negotiating style.

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