Steel or bourbon? Trump may need both

From the legendary Pittsburgh steelworker to the things he may own — blue jeans, bourbon and Harley-Davidson motorcycles — President Donald Trump’s trade policy and the reaction to it have been both ironic and iconic.

Steel was the arrow point of Trump’s America First campaign for president. He said he cared more about Pittsburgh than Paris, although as a globe-trotting businessman he may have spent much more time in the latter than the former.

But the focus on steel and the Steel City worked, just as the Pittsburgh Steelers football team works as a hard-nosed perennial championship contender and a prosperous brand, even though steel has largely moved on from the city.

Pittsburgh now prides itself on “eds and meds” (education and medicine) — its largest employers — and, increasingly, technology and hip restaurants.

But Pittsburgh continues to honor and celebrate its industrial past. That may have been all that candidate Trump needed to know, especially considering that a large part of his plan to Make America Great Again was to go back in time, sort of like pushing a laptop’s restore button.

Fast forward to the present, Trump is planning to put 25% tariffs on all steel imports and 10% on aluminum, fulfilling one of his biggest campaign promises: to protect American workers.

In response, the European Union is planning retaliatory tariffs on all-American products like bourbon, blue jeans and motorbikes, products seemingly more symbolic than economically important.

But none of this is trivial.

Trump won key blue-collar swing states like Pennsylvania by appealing to a heartland longing for a return to things the way they used to be. He was also tapping into a deep vein of resentment that the modern American economy has little room for well-paid laborers.

For the EU, the products it has targeted for trade retaliation may be much more practical in the current milieu. Bourbon is made in Kentucky, the home state of Senate Majority leader Mitch McConnell, and Harleys are made in Wisconsin, the home state of House Majority Leader Paul Ryan. After Trump and Oprah, these are the two most powerful people in America.

And while the EU might be right on target, Trump may be discovering that his aim was a little off. He is now hearing complaints from Wall Street, alarmed economists, other industries fearing trade retaliation and American steel users who rely on imports, or their price-capping utility.

What was once a simple plan of targeting steel and aluminum imports — perhaps more politically astute than economically compelling — has now become complicated.

Trump said last week the tariffs would definitely be in place this week. But since then word has leaked out of the White House that there could be some product exemptions, and more recently, possible exemptions for America’s NAFTA partners contingent upon the progress of ongoing Trump administration efforts to renegotiate NAFTA.

In the words of hippie philosopher Neil Young, “Sooner or later it all gets real.”

If anyone thinks all this mess has hurt the American steel industry, they are mistaken. Trump put steel back on the radar screen. Steel share prices have boomed along with the price of steel itself, which has benefited from the mere threat of tariffs.

In October 2016, a month before Trump’s election, S&P Global Platts assessed the bellwether US hot-rolled steel coil price at $475 a short ton. It is now $800/st — 68% higher and still rising.

Despite the pushback, Trump is expected to stand behind his tariff push, at least until March 14, the day after a special congressional election in southwestern Pennsylvania (aka Steel Country) where the Republican candidate who bills himself as “Trump before there was Trump” is losing his lead.

Some national pundits believe if the Trump-backed Republican candidate loses the race it could signal the beginning of cascading electoral losses that will benefit impeachment-minded Democrats.

If Trump doesn’t get his trade remedies, he may have to slip into his blue jeans and seek personal ones, like a cross-country Harley ride with a bottle of Jack in tow.

The post Steel or bourbon? Trump may need both appeared first on The Barrel Blog.



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