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On March 8, President Donald Trump imposed sweeping new tariffs of 15 percent and 25 percent on aluminum and steel imports, respectively. Trump and his administration decided to take action following the completion of an investigation by the Department of Commerce that seemed to reveal troubling importation trends capable of both hamstringing the American steel and aluminum industries and adversely affecting national security, according to a statement from the White House. This move sent shock waves through the global economy. The stock market dropped as traders grappled with the news. Simultaneously, business leaders within various industries rushed into boardrooms to discuss the potential production impact, which many believed would be significant.
According to research from the DoC’s International Trade Administration, the U.S. is the largest steel importer in the world. In 2017, American organizations imported more than 34 million metric tons of steel, eclipsing figures collected over the previous year by 15 percent. U.S. businesses imported over 53 million metric tons of aluminum in 2016, the most recent year for which data is available, according to researchers for the U.S. Geological Survey. Both of these materials are used across numerous industries, from the automotive sector to food and beverage. In the hours following Trump’s announcement, business leaders speculated that cost of production would rise considerably, an extra expense that would trickle down. Some of the president’s colleagues in Congress agreed with this assessment and expressed worry over how the tariffs might affect American consumers.
“The U.S. is the largest steel importer in the world.”
“I disagree with this action and fear its unintended consequences,” Speaker of the House Paul Ryan said in a statement. “We will continue to urge the administration to narrow this policy so that it is focused only on those countries and practices that violate trade law.”
However, domestic aluminum and steel producers and their workers were ecstatic over the decision.
“Everybody’s just happy,” Mark Goodfellow, director of a steelworkers union in Massena, New York, said in an interview with NPR. “It feels like the American worker is getting a break and finally getting a shot to compete on a level playing field.”
The tariffs, which apply to all countries except for the U.S.’s North American Free Trade Agreement partners Canada and Mexico, went into effect March 23. With these heightened duties officially in place, enterprises across the country will soon start to feel their effect, especially when it comes to production. What sort of impact might these tariffs have on U.S. industry?
A boon for American aluminum and steel
The newly implemented tariffs were designed to help U.S.-based aluminum and steel producers strengthen their footing in the global marketplace. American steel exports have remained flat for some time, according to the World Steel Association. In 2016, the U.S. shipped out just over 9.2 million metric tons, making it the 17th largest supplier of steel in the world. This figure pales in comparison to the world’s largest steel producer China, which exported more than 108 million metric tons of the metal in 2016. A similar disparity exists in the aluminum, where China dwarfs all of its competitors, according to World Aluminum. With these tariffs, the Trump administration hopes to loosen the country’s stranglehold on the market and make U.S. steel and aluminum companies more competitive.
Analysts agree that this outcome is likely to unfold, Reuters reported. U.S. manufacturing firms, in particular, will be forced to incorporate American metal companies into their resourcing portfolios to avoid the hefty costs that come with importing foreign steel and aluminum.
Less than positive for American manufacturers
The benefits of the increased duties do not extend outside of the aluminum and steel sectors. According to Vox, industry groups in numerous spaces condemned the move, including the American Association of Home Builders, the American Association of Architects, the National Retail Federation and the Association of Global Automakers.
The automotive industry was particularly concerned. In a statement, AGA President John Bozzella said, “Trade restrictions and higher prices will nullify many of the benefits we have seen from tax reform. Investments earmarked for new products and plants will instead be funneled to pay for rising steel and aluminum prices used in existing products and facilities.”
Beer producers are also down on the tariffs. According to NPR, beer brewer MillerCoors said there is simply not enough aluminum produced domestically to satisfy demand in the sector. The aerospace and energy spaces are likely to suffer as well, for companies in these industries rely on imported, low-price aluminum and steel to erect production facilities and produce. In short, businesses across numerous industries are likely to engage in extreme belt-tightening as the year moves forward. Aluminum and steel producers, on the other hand, are in an ideal position, for which they can thank the White House.
Organizations on both sides of the tariff equation must work quickly to reorganize their operations and implement workflows that match the new importation landscape. An area of immediate need for improvement will focus on increasing capacity in order to account for the increased demand. Furthermore, producers can look to get more utilization out of their current assets by enhancing their maintenance programs or consider re-commissioning “mothballed” assets to improve their throughput.
Here at USC Consulting Group, we’ve been working with businesses across numerous industries for 50 years, helping them adjust to marketplace transformations of all kinds. Enterprises in need of such assistance in the wake of the Trump administration’s new tariffs should connect with us today.
The Trump administration recently published its 2019 budget proposal, which includes deep spending cuts totaling hundreds of billions of dollars. The budget request also calls for the elimination of several federal oversight bodies, including the U.S. Chemical Safety Board, according to Bloomberg. Created in 1990 as part of the Clean Air Act, the independent watchdog leverages $11 million in annual funding to investigate industrial incidents stemming from the mismanagement of caustic chemicals. While the elimination of the CSB seems, on the surface, an ideal development for industrial organizations, some industry leaders and workplace safety experts have expressed skepticism.
Modern manufacturers are deeply invested in protecting their employees, and support the work of bodies such as the CSB as they establish new workplace safety paradigms centered on innovative strategies and technology. Current CSB Chairperson Vanessa Allen Sutherland has received praise from industry leaders for streamlining the agency’s investigation workflows and collaborating more effectively with businesses. Despite these positive developments, however, the agency has been put on the chopping block as part of a wider push for government deregulation.
How would the abolition of the CSB impact firms developing new safety and reliability programs?
Addressing chemicals in the workplace
Chemical compounds are among the most serious safety hazards found within industrial work environments, according to the National Safety Council. Manufacturers and other businesses leverage hundreds of different substances in everyday workflows and produce significant amounts of equally dangerous chemical residue. Workers who encounter these materials can suffer serious or sometimes fatal injuries. In fact, approximately 268 American employees died in 2016 because of such exposure events, according to research from the Occupational Safety and Health Administration. Firms in the industrial space are well aware of the dangers that their workers face, which drives them to develop safety and reliability programs that prevent injuries.
Oversight bodies like OSHA and the CSB are heavily involved in these efforts, working with industry stakeholders to create enforceable policies that keep employees safe, even as they encounter risk while performing everyday duties. In 2016, the CSB conducted seven major investigations, including an inquiry into the 2013 explosion at the West Fertilizer Company plant in West, Texas, that killed 15 workers and injured more than 260 others. Through these investigations, the CSB developed best practice recommendations so industrial businesses do not repeat the errors of their less fortunate peers. OSHA adds another dimension by approaching the subject of chemical management from the position of the worker and formulating safety standards that keep employees safe. While businesses in the industrial space have traditionally butted heads with OSHA, they have had a productive relationship with the CSB, which many leaders credit for revolutionizing chemical handling practices here and abroad. Its investigations have resulted in the creation of new guidelines that not only keep workers safe but also reduce costs associated with employee injury.
Considering operations after CSB
If Congress embraces the Trump administration’s budget and authorizes the elimination of the CSB, then industrial organizations would have to seek out new external partners and refocus their efforts in order to ensure vigilance in an environment with little federal oversight. The critical insight the agency once provided would be gone, increasing the likelihood of catastrophic events caused by small operational lapses. The West fertilizer plant resulted in more than $230 million in damages to the local community. Without the CSB, another similar situation may develop.
USC Consulting Group can help chemical manufacturers with operating efficiency by developing effective safety and reliability programs for addressing chemical usage in the workplace. Furthermore, our consultants can establish asset performance management programs to ensure facilities are properly maintained with scheduled maintenance and well-planned outages, resulting in their employees staying safe from avoidable mishaps.
Is your organization considering how it might operate in a world without the U.S. Chemical Safety Board? Connect with USC Consulting Group today to learn more on how to improve safety in the workplace.