US metal manufacturers mobilize against Trump tariffs

The American Institute for International Steel, an industry body representing companies that depend on steel imports, sued the Trump administration last week before the US Court of International Trade in New York, challenging the legality of the steel tariffs. (AFP)
Updated 01 July 2018

US metal manufacturers mobilize against Trump tariffs

  • US President Donald Trump in March slapped duties of 25 on steel imports and 10 percent on aluminum
  • The American Institute for International Steel sued the Trump administration last week before the US Court of International Trade in Yew York

WASHINGTON: Feeling the pinch from President Donald Trump’s protectionist trade policies, the American metal industry has rallied its forces to plead for changes.
Employees from the Texas steel pipe producer Borusan Mannesmann Pipe sent some 4,500 post cards to Trump and members of Congress, on behalf of their employer in the Houston suburb of Baytown — which imports unfinished pipes from Turkey.
Trump in March slapped duties of 25 on steel imports and 10 percent on aluminum, and at the start of June removed temporary exemptions for major producers Canada, Mexico and the European Union.
While Trump says the border taxes protect US national security and have breathed life into time-ravaged American producers, about 21,000 businesses have sought exemptions from the tariffs for foreign-made goods, arguing that the duties threaten their import-dependent bottom lines.
But three months after the first requests, the government has reviewed only 98, Commerce Secretary Wilbur Ross said in recent congressional testimony. Of these, just 42 were approved.
BMP CEO Joel Johnson was among the very first business leaders to seek product exemptions for the Houston pipe company. But when he got no response, he decided to make his case directly, along with thousands of others.
“We made an offer to President Trump and Secretary Ross which was very simple,” he said.
“We did a request for a two-year exemption of the tariffs to allow us to build a new factory in Baytown and at the end of these two years we will stop importing and we will be 100 percent US-made pipe.”
The proposition should appeal to Trump, given his “America first” agenda, said Johnson, adding that it would bring his workforce to 437 people from 267.
In Baytown, unemployment is two and a half times the national average at 10 percent, and Johnson warned the company will be forced to lay workers off if it faces an annual hit of $25 million to $35 million from the tariffs.
Republican Texas lawmaker Brian Babin made the same case to Ross last week.
Others are opting to play hardball.
The American Institute for International Steel, an industry body representing companies that depend on steel imports, sued the Trump administration last week before the US Court of International Trade in New York, challenging the legality of the steel tariffs.
The organization is calling on the courts to strike down the 1962 legal provision Trump used to impose the new duties, claiming it is unconstitutional.
Sometimes called the “national security clause,” Section 232 of the Trade Expansion Act of 1962 gives the US president extraordinary powers over foreign trade, a power the US Constitution generally confers on Congress.
“Section 232 allows the president to consider virtually any effect on the US economy as part of ‘national security,’” AIIS President Richard Chriss said in a statement.
The federation says many American business are suffering under the tariffs while ports and workers have seen a sharp decline in their businesses’ throughput.
So far, the Federal Reserve system’s regional manufacturing indices show general manufacturing activity remains quite healthy by historical standards.
But steel prices have risen sharply and fast. In October, a ton of hot-rolled steel coil went for $577, its lowest level in a year, Johnson said.
As of Friday, it was closing in on twice that at just under $917.
As the metal tariffs battle rages, a second set of Trump tariffs on Chinese goods is due to take effect July 6, while US businesses are being hit with retaliatory tariffs from Canada, Mexico, the EU and China.
The Trump administration also announced in late May it was considering using Section 232 to slap duties on the hundreds of billions in autos imported annually, a prospect economists say would make America’s trade wars far more serious.


Oil-rich wealth funds seen shedding up to $225 billion in stocks

Updated 30 March 2020

Oil-rich wealth funds seen shedding up to $225 billion in stocks

  • Risking more losses is not an option for some funds from oil-producing nations

LONDON: Sovereign wealth funds from oil-producing countries mainly in the Middle East and Africa are on course to dump up to $225 billion in equities, a senior banker estimates, as plummeting oil prices and the coronavirus pandemic hit state finances.

The rapid spread of the virus has ravaged the global economy, sending markets into a tailspin and costing both oil and non-oil based sovereign wealth funds around $1 trillion in equity losses, according to JPMorgan strategist Nikolaos Panigirtzoglou.

His estimates are based on data from sovereign wealth funds and figures from the Sovereign Wealth Fund Institute, a research group.

Sticking with equity investments and risking more losses is not an option for some funds from oil-producing nations. Their governments are facing a financial double-whammy — falling revenues due to the spiraling oil price and rocketing spending as administrations rush out emergency budgets.

Around $100-$150 billion in stocks have likely been offloaded by oil-producer sovereign wealth funds, excluding Norway’s fund, in recent weeks, Panigirtzoglou said, and a further $50-$75 billion will likely be sold in the coming months.

“It makes sense for sovereign funds to frontload their selling, as you don’t want to be selling your assets at a later stage when it is more likely to have distressed valuations,” he said.

Most oil-based funds are required to keep substantial cash-buffers in place in case a collapse in oil prices triggers a request from the government for funding.

A source at an oil-based sovereign fund said it had been gradually raising its liquidity position since oil prices began drifting lower from their most recent peak above $70 a barrel in October 2018.

In addition to the cash reserves, additional liquidity was typically drawn firstly from short-term money market instruments like treasury bills and then from passively invested equity as a last resort, the source said.

It’s generally a similar trend for other funds.

“Our investor flows broadly show more resilience than market pricing would suggest,” said Elliot Hentov, head of policy research at State Street Global Advisers. “There has been a shift toward cash since the crisis started, but it’s not a panic move but rather gradual.”

The sovereign fund source said the fund had made adjustments to its actively managed equity investments due to the market rout, both to stem losses and position for the recovery, when it comes.

Exactly how much sovereign wealth funds invest and with whom remain undisclosed. Many don’t even report the value of the assets they manage.

On Thursday, the Norwegian sovereign wealth fund said it had lost $124 billion so far this year as equity markets sunk but its outgoing CEO Yngve Slyngstad said it would, at some point, start buying stocks to get its portfolio back to its target equity allocation of 70 percent from 65 percent currently.

Slyngstad also said that any fiscal spending by the government this year would be financed by selling bonds in its portfolio.