When the Trump Administration imposed tariffs of 25% on steel and 10% on aluminum in March, it kicked off one of the nation’s most heated and far-reaching trade wars since the Smoot-Hawley Tariff Act of 1930. That legislation, which was expanded by President Hoover to include more than 20,000 products across the agriculture and industrial sectors, is viewed historically as an abject failure and a prime reason for the sustained economic depression through the 1930s.
Seven months into Trump’s trade war, the jury is still out. The circumstances today are markedly different than 88 years ago, of course. The economy is strong. But America is no longer the global manufacturing powerhouse it once was, and the nation has operated a global trade deficit of $100 billion or more annually since the late 1990s (last year: $795 billion).
Opponents of Trump’s actions on trade argue that the policies are outmoded, shortsighted measures that undermine a free trade economy. Pundits in Trump’s camp believe that any short-term hit to U.S. businesses is worth the potential long-term impact to the economy, particularly the manufacturing sector.
“For the last 25 years, China has been waging a trade war against the United States,” said Dan DiMicco, a senior trade adviser to President Trump’s campaign, during a talk at Metalcon last month. “A lot of us have been fighting that war, but without the resources to win it, until now.”
DiMicco should know. As the former CEO of Nucor Corp., the nation’s largest steel producer, he’s seen firsthand the power a government-controlled economy like China’s can wield. The nation is home to half of the world’s 10 largest steel production operations, and has been known to “dump cheap steel” on the world market to artificially deflate material prices, said DiMicco. More alarming, he said, is the potential threat to national security: “Our defense department says we can no longer supply parts we need for our military. You cannot be a leader of the world if you don’t have a strong manufacturing base and a strong steel industry.”
Meanwhile, the U.S. construction industry keeps humming along. Prices for aluminum- and steel-based materials have soared, but the construction sector seems to be taking it in stride. Nonresidential construction spending reached a record-high $762.7 billion in August, bolstered by a healthy backlog of work. And even when the impacts from the tariffs are factored in, construction industry economists remain largely upbeat with their forecasts for 2019 (tinyurl.com/y9qwcwln).
For now, Building Teams are finding a way to get their projects completed under increasingly onerous circumstances. Is there a tipping point when escalating costs will force developers to shelve projects? Or will prices stabilize to a “new normal” that keeps the work flowing? The answers, unfortunately, are anyone’s guess.