US withdrawal from TPP to impact steel sector — Wood Mackenzie
US President Trump’s decision to leave the Trans-Pacific Partnership free-trade deal earlier this week will have little immediate impact on the country’s steel industry, though the long-term effects are likely to be significant, Wood Mackenzie is warning.
Despite intense lobbying from Japan and other nations part of the deal, which never entered into force but was signed by the US, Japan, Canada, Mexico, Australia, New Zealand and six other countries, Trump officially removed the US on Monday citing concerns that multilateral deals were harming American industries.
But analysts at Wood Mackenzie argue that not having easy access to the market such partnership provided will be a loss for the US steel industry:
In 2015, around 30%, or 11 million tonnes, of all steel imported into the US came from the countries in the agreement at a value of approximately US$11 billion. At the same time, 89% or around 9 million tonnes of all steel exported from the US was destined to these countries – at a value of approximately US$12 billion.
“This shows that the US steel industry made more money by selling steel to these trading partners than it lost by importing from them,” Wood Mackenzie says in a note released Wednesday.
What’s more critical, the analysts argue, is that the kind of steel the US exported to the TPP countries was high in value–added, which is exactly the kind of product that helps to keep the high-cost US steelmaking business afloat.
They do acknowledge the move will have a very minor immediate impact on steel as the majority of ‘TPP trade’ was done with Mexico and Canada (both under NAFTA) — accounting for 72% of ‘TPP-sourced imports’ and 99% of ‘TPP-destined exports’.
“Ultimately, NAFTA plays a more important role for the sector,” they say, adding that it’s important to keep in mind that US steel and manufacturing industries are heavily reliant on imports.
As much as 60% of total steel consumed in the country, including imports in the form of manufactured goods, comes from foreign markets. But it remains unclear whether Trump would seek individual deals with the countries in the TPP, a group that represents about 13.5% of the global economy, according to World Bank figures.
“Weaning itself off ‘imported steel’ will put pressure on manufacturers’ costs and ultimately the US consumer will suffer,” Wood Mackenzie concludes.