The trade war and the U.S. steel industry

The trade war and the U.S. steel industry

José Carlos Díaz Silva[1] , OBELA[2]

In 2024, the US announced a general increase from 7% to 25% and 100% for electric vehicles (EVs). It was followed by Canada, which imposed 100% tariffs on EVs, and Mexico, which eliminated EV exemptions and imposed a 25% tariff on steel. Subsequently, on April 3, 2025, Trump announced reciprocal tariffs on all countries, with a 10% base plus an additional country-specific percentage. This led to an escalation with China, for whom they have been set at over 100%. In this article, we will review the consequences of the trade war on the North American steel industry. 

            The restrictions on Chinese steel are due to a simple reason: it is the world's leading producer, with lower production costs. According to the World Steel Association, of the top 50 companies worldwide in 2023, 27 were of Chinese origin, and their production of 674 million tons (M.ton) accounted for 60.1% of the total ranking. In contrast, there were only 4 US companies, with an output of 64.5 M.Ton, equivalent to 5.8% of the top 50 and 9.6% of the Asian ones. China Baowu Group, the most important company, produced 130.77 M.tons in the same year, more than double that of the US. The most productive North American companies were Nucor Corporation and Cleveland-Cliffs, with a supply of 21.2 and 17.3 M.tons, respectively. 

            Table 1 shows world steel production by country in 2024. The dominance of Asian steel is clear. China produced 53.4% of the global supply, followed by India (7.9%) and Japan (4.5%). In fourth place, with 79 M.ton is the USA. The gap between East and West is significant. The BRICS+ together produced 1,240 M.ton (65.9% of the total). Even if we disregard China and India, the main producers, the rest of the bloc offered 157 M.tons, twice as much as the USA. Below them are Mexico and Canada, with a production of 14 and 12 M.ton, respectively, thus contributing less than 1% of the world's steel.

            Will tariffs curb imports? Traditionally, these measures are assumed to boost domestic industry by protecting it from cheaper manufactured goods. This is a policy that encourages local production (import substitution industrialization). To be successful, it requires an increase in the scale of production and investment. According to the American Iron and Steel Institute, the industry's utilization rate is 75%, 5% below the sustainable rate. From the data, it can be inferred that, in the short term, the US can supply 4 M tons of additional steel without cost increases. Once this limit is exceeded, it will be necessary to expand production capacity.

            In 2023, the US imported 26.4 M.ton of steel, of which, according to the Economic Census Bureau, 38% was demanded within the T-MEC (Mexico, 14.6% and Canada, 23.4%). On the other hand, only 2.41% was imported from China. Thus, the US can only replace 15.2% of its imports. In addition, its industry is in crisis. US Steel Corp. went from being the world's leading steel company in 1950 to seeking to be rescued by Nippon Steel to reactivate its production. The merger was blocked by former President Biden in 2025 (and ratified by Trump), on national security grounds. The decline of the U.S. steel industry began in the 1970s. First, global demand for steel in the world declined until the 2000s, when it got a new boost from China. Then, production shifted from being based in large plants to smaller mills, which were incorporated in Asia. The new situation meant that companies such as US Steel were left behind. 

Due to U.S. production constraints, a policy of subsidies or import quotas, which take into account the reality of its industry, would make more sense. However, such measures are unfeasible in the framework of the austerity proposed by Trump and his hitherto advisor, businessman Musk. Cutting its trade and fiscal deficits through tariffs and austerity will only deepen its industrial crisis.

Finally, although the U.S. does not directly import a large amount of steel from China, it does so through other products such as automobiles. Trump's auto repatriation program will imply a greater demand for steel, which, as we have seen, the US cannot supply. Producing cars domestically, besides being more expensive, will not cut its trade deficit. There are two possibilities: that the Trump administration will gradually back down on its tariff measures or that it will continue and precipitate the US crisis. In either case, the most likely outcome is that Washington will lose the trade war.