KEY POINTS
- Recent steel plant closures, such as Liberty Steel, have now affected over a thousand steel jobs, highlighting the consequences of inaction on surging imports.
- Foreign producers in countries like Mexico, Algeria, and Egypt are increasingly exporting low-priced steel wire rod and rebar to the U.S., causing wire rod import prices to fall 23% in less than a year.
- Foreign producers undercut U.S. manufacturers on prices due to substantial subsidies and export promotion programs, as well as much lower regulatory burdens.
- Mexico and Canada also continue to benefit from duty-free steel trade despite the surging imports of various steel products, violating the U.S. trade agreement provisions that lifted steel tariffs on Mexico and Canada.
- New robust trade measures are needed to address the evolving threats to the U.S. steel industry to prevent further losses to both U.S. producers and workers.
Imports Continue to Injure U.S. Steel Producers and Workers
The U.S. steel industry has long been vulnerable to import surges in essential products like steel rebar and wire rod, crucial for infrastructure and construction projects. Foreign producers have been able to sell products at prices that significantly undercut U.S. manufacturers, with little to no pushback or support from the U.S. government until 2018. The effect was a 13,400 decline in steel product manufacturing employment from 2000 to 2023 as U.S. producers were increasingly undermined by an increasing flood of imports.
The most recent loss includes Liberty Steel being forced to idle their steel wire plant in Peoria, Illinois and furlough over 500 employees on December 9th, 2024, after idling the steel mill rod mill operations there in October. Earlier this year, Liberty Steel also was forced to suspend rod mill operations at its Georgetown, South Carolina facility.
The U.S. steel industry, though challenged by decades of rising imports, remains a critical part of the national and regional economy, particularly in the Midwest states of Ohio, Pennsylvania, Indiana, Michigan, and Illinois. Employing over 143,000 people directly[1],[2] and supporting more than one million indirect jobs[3] nationwide, the industry had notable employment gains in the wake of the Trump Administration’s 2018 Section 232 steel tariffs. However, despite showing signs of recovery after decades of lost employment from imports, a new surge of imports from tariff-exempt countries like Mexico and extremely cheap steel from elsewhere is now reversing this progress.
Surging steel imports are displacing U.S. production and forcing the loss of thousands of manufacturing jobs. In addition to Liberty Steel’s idling, surging imports have caused other major producers like Wheatland Tube to close their Illinois steel plant in September of this year, laying off 237 workers.[4] And before that, in October 2022, imports forced Zekelman Industries to shutter their Long Beach, California steel factory, with 145 jobs lost.
These are just a handful of examples of how the steel import surge is leading to wide-spread job losses and stalled investments in new facilities, also jeopardizing future job creation. As shown in Figure 1, By late 2023, employment growth in steel manufacturing had stagnated, and recent data shows a total of 1,400 jobs lost in the steel product manufacturing sector in the past year, a clear sign of the mounting impact of the import surge. These jobs losses not only harm the steel workers directly, but also have large ripple effects up and down the entire supply chain and heavily impact the communities that rely on these jobs.
Figure 1 [5]:
Foreign producers, especially those from countries like Mexico, Algeria, Egypt, and others, have been able to capture a larger share of the U.S. market as imports rise, undermining domestic production and chopping away at the domestic U.S. workforce. As shown in Figure 1, existing protections such as Section 232 steel tariffs gave some relief and employment growth to the steel industry, demonstrating the effectiveness of broad tariffs. However, as foreign producers increasingly flood the U.S. market at ever lower prices, the U.S. must also adjust and respond with additional trade measure to support U.S. producers and protect jobs.
Foreign Producers Subsidizing and Undercutting Prices
The harm from steel imports lies in both rising volumes and falling prices. Imports from countries like Mexico, Algeria, Egypt, and others are often priced lower due to subsidies, lower production costs, and less stringent production regulations. This creates a situation where U.S. manufacturers cannot compete on price alone, even with the existing Section 232 steel tariffs. This price differential is increasingly exacerbated as U.S. manufacturers lose economies of scale and production efficiency as imports take over larger portions of the market. The 25% tariff, intended to protect U.S. producers, is insufficient to offset the considerable price advantages held by foreign producers, especially when these foreign countries are engaging in increasingly aggressive measures to take over the U.S. market.
As shown in Figure 2, the average import price for steel wire rod has fallen drastically. Falling from around $1.07 per kilogram in early 2023, to as low as $0.82 per kilogram in late 2023 and throughout 2024, more than a 23% price drop in less than a year. Moreover, these price drops have coinciding with large import surges (in months such as October in 2023, and April, May, and July in 2024. These low-price import surges have been largely fueled by countries like Algeria and Egypt.
Figure 2 [6]:
Countries like Algeria and Egypt can sell steel products into the United States at extremely low prices because of extensive subsidy programs across developing countries, usually specifically targeting the U.S. and European markets.
A recent OECD study published in November 2024 reveals that non-OECD countries, such as Algeria and Egypt, are heavily subsidizing their steel industries at an alarming rate. In 2021, these developing economies provided seven times more grants per unit of steelmaking capacity compared to OECD nations (such as the United States). Between 2005 and 2021, non-OECD countries not only tripled their reliance on below-market borrowings but also increased grant allocations per unit of capacity by a staggering tenfold.
One major example of these subsidy programs is the Bechar 1-million-ton steel complex in Algeria, Algeria’s largest iron and steel plant in its history. The plant will be developed and run by a joint venture consisting of the Chinese consortium CMH and the National Iron and Steel Company of Algeria (FERAAL). The total investment in this complex will be well over $1 billion and the facility is expected to open in 2026. The plant will source iron from the Gara Djebilet iron mine, in which the Algerian government is investing $7-10 billion.[7]
This aggressive subsidization distorts global competition, undermines U.S. production efficiency, and places U.S. steel producers and workers at a significant economic disadvantage.[8]
Overregulation in the U.S.
The import price problem is exacerbated by the fact that U.S. producers must comply with much more burdensome production regulations that increase manufacturing costs. In contrast, countries like Algeria and Egypt have much less regulations (in addition to the generous subsidies) and are therefore able to produce steel at much lower costs.
According to the National Association of Manufacturers (NAM), the total cost to the U.S. economy for federal regulation compliance totals $3.079 trillion, this is up $465 billion since 2012. And this overregulation hurts manufacturers acutely. The average regulatory cost per employee for manufacturers is now $29,100 on average, and $50,100 for small manufacturers.[9]
This overregulation puts U.S. producers at a great disadvantage and further allows imports to undercut domestic prices. If U.S. producers did not have to bear this regulatory burden, the NAM estimates that “Manufacturers would spend 86% of funds currently spent on compliance on reinvesting in their business or employee initiatives.”[10]
As shown in Figure 3, the combination of subsidy programs and lower regulatory burdens allows imports at extremely low prices. Countries like Algeria and Egypt to flood the U.S. market with steel products (like steel wire rod) at prices far below other countries and far below U.S. domestic prices. Wire rod import prices from Algeria and Egypt are even far below the import prices of countries subject to steel quota agreements, instead of the any regular Section 232 steel duties. These steel quota countries include Brazil, South Korea, Japan, and the European Union.
Figure 3 [11]:
Increasingly lower import prices is not just an issue for steel wire rod. The same price and import pressure is also impacting the rebar industry. While import volume has not surged substantially in 2024, the continued level of imports along with declining prices is putting substantial strain on U.S. producers. According to the GMK Center, the rebar market is currently facing weak demand due to the lagging performance of the construction sector and a degree on economic uncertainty. This weak market has been exacerbated by a substantial fall in rebar prices, with much of the pressure coming from increasingly cheaper imports, substantially narrowing the profit margin for U.S. rebar manufacturers. As shown in Figure 4, despite rebar import volume being down slightly due to the poor market conditions, foreign producers have dropped rebar prices substantially, putting U.S. producers in a grim position and threatening U.S. steel manufacturing jobs.
Figure 4 [12]:
The Threat of Mexican and Canadian Imports
While steel imports from a variety of countries pose significant challenges to U.S. producers, imports from Mexico and Canada present an especially acute threat. In 2019, Canada and Mexico refused to finalize the newly negotiated U.S. Mexico Canada Agreement unless the 232 steel and aluminum tariffs previously imposed by President Trump were resolved. The U.S., Mexico, and Canada reached an agreement[13],[14] where the U.S. would drop its 25% tariffs on steel and 10% tariffs on aluminum in return for Mexico’s and Canada’s agreement to prevent import volumes from exceeding historic baseline levels. The historic level is the 2015 to 2017 average of shipments. The Agreement further provided that if Mexico breached, the U.S. could, after consultations, reinstate the tariffs.
However, in contrast to other Section 232 steel tariff agreement with countries like Brazil, Japan, South Korea, and the European Union, where Customs and Border Patrol administered steel quotas, this agreement with Mexico and Canada became completely unregulated and dependent on voluntary restraint from Mexico and Canada. Unsurprisingly, this loophole allowed steel imports from Mexico and Canada to soar across many steel product categories, all entering duty-free and unlimited.
Mexico not only ignores this loophole, but aggressively exploits it to undercut U.S. producers and capture a larger share of the U.S. market. Mexico has aggressively pursued policies to promote and subsidize its steel industry, directly targeting the U.S. market. The U.S. Department of Commerce has repeatedly confirmed Mexico’s use of subsidies to support the export of steel products, such as steel welded wire mesh[15] and fabricated structural steel[16], to the United States. These practices are pervasive in Mexico and likely extend to other steel products experiencing surges in U.S. imports. Mexico’s actions, driven by a strong incentive to expand its steel industry and U.S. market share, come at the expense of American manufacturers and the broader U.S. economy.
Recommendations for Protecting U.S. Steel Producers
To address these challenges and protect the U.S. steel industry, the incoming Trump Administration must take decisive action. Several steps should be considered to protect U.S. steel employees and boost domestic production are to:
- Increase the Section 232 Tariff Rate: The current 25% tariff rate is insufficient to protect U.S. producers from the significantly lowered prices of foreign producers, who are often subsidized heavily. A markedly higher tariff rate would be more appropriate given the current market conditions, and would help U.S. manufacturers better compete with cheap imports.
- Include Mexico and Canada in Section 232 Tariffs or Subject Them to U.S.-Enforced Quotas: The U.S. should consider including Mexico and Canada in the Section 232 tariffs or impose a more restrictive quota system (administered by the U.S.) on imports from these countries (as opposed to the currently voluntary restraint framework). A quota agreement like those with Brazil, Japan, and South Korea would protect U.S. producers from unprecedented floods cheap steel and a variety of exploited loopholes.
- Broaden the Scope of Section 232 Tariffs to Include Downstream Products: The scope of U.S. Section 232 tariffs should be expanded to include downstream steel products such as PC Strand, Welded Wire Mesh, and Fabricated Structural Steel (FSS). These products are critical to U.S. infrastructure projects and construction, and their inclusion in the tariff system would close a significant loophole and help protect domestic steel producers from foreign competition. This measure already has substantial support in the industry and in the Senate.
- Strengthen and Expand Buy American Rules: The U.S. government should strengthen and expand Buy American rules to further support domestic steel producers, especially for projects that receive government funding. Ensuring that U.S. steel is prioritized for government contracts will provide additional support for the industry and create greater opportunities for workers in the domestic industry.
Conclusion
The continued influx of ever cheaper steel imports, particularly steel rebar and steel wire rod, is posing a serious threat to U.S. steel producers. Producers in countries like Mexico, Algeria, and Egypt, among others, are increasingly penetrating the U.S. market through surging imports, downward prices, and substantial foreign subsidies. These issues, combined with sometimes poor market conditions and high U.S. regulatory burdens, have led to plant closures, job losses, and threats to the sustainability of domestic steel production. While trade measures such as Section 232 tariffs have provided some relief in the past, urgent action is needed to revise steel trade measures to counter evolving threats to domestic manufacturers, safeguard critical infrastructure, and preserve American jobs.
[1] Employment for manufacturing: Iron and steel mills and ferroalloy production (NAICS 3311) in the United States. (2024b, April 26). https://fred.stlouisfed.org/series/IPUEN3311W200000000
[2] Employment for Manufacturing: Steel Product Manufacturing from Purchased Steel (NAICS 3312) in the United States. (2024b, April 26). https://fred.stlouisfed.org/series/IPUEN3312W200000000
[3] Rechenberg, A. Mexico’s Violation of Steel Import Agreement is Threatening Local U.S. Economies – Coalition for a Prosperous America. https://prosperousamerica.org/mexicos-violation-of-steel-import-agreement-is-threatening-local-u-s-economies/
[4] Anselmo, J. (2024, September 26). Wheatland Tube to shutter steel plant, lay off 237 workers. Manufacturing Dive. https://www.manufacturingdive.com/news/wheatland-tube-chicago-steel-plant-closure-layoff-237-zekelman/727910/
[5] Bureau of Labor Statistics. https://data.bls.gov/dataViewer/view/timeseries/CEU3133120001
[6] USA Trade Online. U.S. Census Bureau. https://usatrade.census.gov/
[7] Wu, J. (2023, October 14). China International Water & Electricity to provide green hydrogen solution to Algeria’s 1 million ton Bechar steel complex. China Hydrogen Bulletin. https://chinahydrogen.substack.com/p/china-international-water-and-electricity
[8] Mercier, F. (ed.) (2024), “The quantitative impacts of subsidies on steel firms: An econometric analysis of the impact of subsidies on steel firms’ financial performance and crude steelmaking capacity”, OECD Science, Technology and Industry Policy Papers, No. 167, OECD Publishing, Paris, https://doi.org/10.1787/cb4e21a6-en.
[9] National Association of Manufacturers. (2024b, May 6). The cost of Federal Regulations – NAM. NAM. https://nam.org/issues/regulatory-and-legal-reform/cost-of-regulations/
[10] Id.
[11] USA Trade Online. U.S. Census Bureau. https://usatrade.census.gov/
[12] USA Trade Online. U.S. Census Bureau. https://usatrade.census.gov/
[13] Joint Statement by the United States and Mexico on Section 232 Duties on Steel and Aluminum, https://ustr.gov/sites/default/files/Joint_Statement_by_the_United_States_and_Mexico.pdf
[14] United States Announces Deal with Canada and Mexico to Lift Retaliatory Tariffs. (n.d.). United States Trade Representative. https://ustr.gov/about-us/policy-offices/press-office/press-releases/2019/may/united-states-announces-deal-canada-and
[15] Standard steel welded wire mesh from Mexico: Countervailing duty order. (2021, April 12). Federal Register. https://www.federalregister.gov/documents/2021/04/12/2021-07448/standard-steel-welded-wire-mesh-from-mexico-countervailing-duty-order
[16] Certain fabricated structural steel from Mexico: final affirmative countervailing duty determination. (2020b, January 30). Federal Register. https://www.federalregister.gov/documents/2020/01/30/2020-01723/certain-fabricated-structural-steel-from-mexico-final-affirmative-countervailing-duty-determination
