In Texas, TrumpвЂ™s steel tariff stirs uncertainty and concern
BAYTOWN, Texas вЂ” Joel Johnson examines the shipping labels on 35-ton coils of American-made steel that will be unspooled, bent and welded into rounded sections of pipe.
OneвЂ™s from Nucor, a mill in Arkansas. AnotherвЂ™s from Steel Dynamics in Mississippi. But much harder to spot in the sprawling factory yard is the imported steel thatвЂ™s put his company in the crosshairs of President Donald TrumpвЂ™s bitter trade dispute with AmericaвЂ™s allies and adversaries.
Trump says his tariffs on steel, aluminum and other goods will put U.S. companies and workers on stronger footing by winding back the clock of globalization with protectionist trade policies. But the steel tariff вЂ” essentially a 25 per cent tax вЂ” may backfire on the very people the president is aiming to help. The Commerce Department has been deluged with requests from 20,000 companies seeking exemptions.
Johnson is the CEO of Borusan Mannesmann Pipe US, a company with Turkish roots that manufactures the welded pipe used by energy companies to pull oil and natural gas out of the earth. He has been fighting an uphill battle to get a two-year exemption from TrumpвЂ™s tariff on steel imports.
Without a waiver, Johnson said, Borusan faces levies of up to $30 million a year вЂ” a staggering sum for a business with plans to expand.
вЂњWe donвЂ™t have any proof weвЂ™re being heard,вЂќ Johnson said.
Eighty miles southwest, in Bay City, global steel giant Tenaris also is seeking an exemption from the tariffs. The company churns out steel pipe in a $1.8 billion state-of-the-art facility that began operating late last year, using solid rods of steel called billets that are made in its mills in Mexico, Romania, Italy and Argentina. Of the four, only Argentina has agreed to limit steel shipments to the U.S. in exchange for being spared the tariff.
вЂњThe decision is out of our hands,вЂќ said Luca Zanotti, president of TenarisвЂ™s U.S. operations, while expressing confidence its request would be approved. If itвЂ™s not? вЂњWeвЂ™ll adapt,вЂќ he said.
Steelworkers, meanwhile, are cheering the tariff even as they remain skeptical of TrumpвЂ™s pledge to empower blue-collar Americans. They also worry about the possibility of too many exemptions.
вЂњYou put these tariffs (in place) but now youвЂ™re going to exclude everybody so theyвЂ™re kind of pointless,вЂќ said Durwin Royal, president of United SteelworkersвЂ™ Local 4134 in Lone Star, Texas.
The diverse views illustrate the complexity, confusion and concern lurking behind TrumpвЂ™s вЂњAmerica FirstвЂќ pledge.
Pipe mills are numerous in Texas, which leads the country in oil and natural gas production. Factories that use imported steel typically do so when they canвЂ™t get the exact type or quantity they need from U.S. producers. Many of them are among the thousands of companies that have filed exclusion requests to avoid being hit by the steel tariff.
Most of them are in the dark, unsure if their applications will be approved as the Commerce Department struggles to process a dramatically higher number of requests than it expected to receive.
A denial may torpedo plans to expand a factory. Or a company may have to lay off employees. The stakes are especially high in Texas: Economists Joseph Francois and Laura Baughman have estimated the Trump steel tariff and separate 10 per cent tariff on imported aluminum will trigger the loss of more than 40,000 jobs.
ThereвЂ™s no playbook to guide companies through an exemption process Johnson described as chaotic and unpredictable. HeвЂ™s hired a lobbyist, former New York Gov. George Pataki. HeвЂ™s fending off opposition from competitors, including a Tenaris-owned business, who want BorusanвЂ™s request denied.
On a sweltering afternoon earlier this month, Johnson assembled dozens of his employees in an air-conditioned room for what amounted to a Hail Mary pass. After lunching on sandwiches from Chick-fil-A, Borusan workers wrote personal messages on oversized postcards to be sent to Trump and other senior officials in Washington and Austin, the Texas capital, pleading for their help in securing the tariff exemption.
вЂњI donвЂ™t know what motivates politicians besides votes,вЂќ Johnson said. вЂњThatвЂ™s why weвЂ™re doing this crazy exercise.вЂќ
Royal is in his third term as the president of Local 4134.
He and the localвЂ™s vice-president, Trey Green, are union Democrats in the heart of Trump country. Lone Star is in Morris County, Texas, where Trump received nearly 70 per cent of the vote in the 2016 presidential election. Royal and Green initially backed independent Vermont Sen. Bernie Sanders before casting their votes for Democrat Hillary Clinton.
Their union hall is a mile and a half from the U.S. Steel factory that manufactures welded pipe made from metal produced in the companyвЂ™s mills in Indiana and Illinois. Like the union, U.S. Steel backed TrumpвЂ™s tariff, declaring that his action would вЂњlevel the playing fieldвЂќ by blocking other countries from dumping inexpensive steel in the United States. Much of it comes from China.
Although Royal and Green were heartened by the steel tariff, they said theyвЂ™re under no illusion Trump is a friend to organized labour. Nor are they convinced his tough talk on trade will lead to a rebuilt U.S. steel industry with more and better jobs. Echoing Sanders, they called for a broader strategy to prevent corporations from sending American jobs to low-wage countries.
вЂњI donвЂ™t know that putting tariffs on just one or two particular items are going to be the mainstay that helps us in the future,вЂќ Green said.
Royal and Green said theyвЂ™re still waiting for Trump to follow through on his pledge to empower working-class Americans that he said were вЂњforgottenвЂќ by Washington.
вЂњSo much money is in politics now itвЂ™s kind of drowning people like us out,вЂќ Royal said. вЂњWeвЂ™re not going to take (a congressman) to dinner and buy him a new set of golf clubs or give $250,000 toward his campaign. You can tell whoвЂ™s got the loudest voice there.вЂќ
COST OF DOING BUSINESS
The Tenaris factory is a massive, modern facility just off the highway leading into Bay City, 21 miles from the Gulf of Mexico. About 640 people work here, but only a handful come into direct contact with the 50,000 tons of pipe the 1.2 million-square-foot factory is able to manufacture each month. The process is almost entirely automated, watched over by employees huddled in front of computer screens.
The company manufactures seam-free pipe typically used in offshore energy production or for transporting highly corrosive gas.
Tenaris began construction of the Bay City plant five years ago, long before anyone anticipated an American president would slap a tariff on steel. Zanotti declined to say how much Tenaris may have to pay, but he downplayed the expense as a cost of doing business on a global scale. Tenaris operates in 16 countries, including Nigeria, which ranks 145 out of 190 countries on the World BankвЂ™s вЂњease of doing businessвЂќ index.
вЂњOf course we donвЂ™t like it,вЂќ Zanotti said of the tariff.
But, he added, вЂњweвЂ™re used to dealing with moving parts. This is another moving part.вЂќ
The company doesnвЂ™t have a registered lobbyist in Washington, let alone an office. But Tenaris has deep pockets and is in the U.S. for the long haul.
Zanotti said the company has spent $8 billion over the last decade to expand its foothold in America, a figure he doesnвЂ™t think the Commerce Department should overlook. The investment includes the Bay City factory and the acquisition of the Maverick Tube Corporation, based in Houston. Like Borusan and U.S. Steel, Maverick makes pipe with a welded seam.
вЂњWeвЂ™re positive weвЂ™re going to get a good conclusion,вЂќ Zanotti said.
LETвЂ™S MAKE A DEAL
Johnson said he has a proposition for a president who prides himself on being a master dealmaker.
About 60 per cent of BorusanвЂ™s welded pipe is manufactured with American-made steel. The rest is shipped from Turkey already in tube form; itвЂ™s heat-treated, threaded and inspected in Baytown. Johnson is proposing that Borusan be allowed to bring in 135,000 tons of Turkish pipe each year for the next two years, tariff-free. In return, the company will build a new factory, right next to its existing plant.
ThatвЂ™s a $75 million investment that will allow Borusan to hire 170 new employees, augmenting its existing workforce of 267, according to Johnson. The expanded capacity also will allow Borusan to wean itself from the Turkish imports. He said heвЂ™s gotten no reply to his pitch.
The company brought ex-Gov. Pataki, a Republican, on board in March and has paid him $75,000 to drum up support in Washington. But Johnson said heвЂ™s unsure if PatakiвЂ™s made a difference.
вЂњWeвЂ™re not politicians. We make pipe,вЂќ he said. вЂњWe felt like that was a move we had to make because we are so far out of our element.вЂќ
Johnson said he had for weeks unsuccessfully sought support from GOP Rep. Brian Babin, whose district includes Baytown. Babin wrote to Commerce Secretary Wilbur Ross on Thursday, expressing his strong support for BorusanвЂ™s request and urging Ross to give it вЂњyour highest consideration.вЂќ
вЂњFinally,вЂќ Johnson said.
The Commerce Department has been posting the thousands of requests for tariff exemptions online to allow third parties to offer comments and objections вЂ” even competitors who have an interest in seeing a rivalвЂ™s request denied. Several of them, including U.S. Steel and Tenaris-owned Maverick Tube, objected to BorusanвЂ™s bid, saying the Turkish pipe it imports is readily available from American suppliers. They added that Turkey has been cited by the Commerce Department for dumping steel pipe in the U.S.
But Johnson said the objections are aimed at undercutting Borusan. He said no U.S. pipe mill is serious about selling to him because heвЂ™d want very detailed information about their products вЂ” such as the composition of the steel and a history of customer complaints.
вЂњThey just donвЂ™t want to see another factory go up here,вЂќ Johnson said. вЂњThey donвЂ™t want to see a competitor grow.вЂќ
Contact Richard Lardner on Twitter at http://twitter.com/rplardner