Depending who you are, the Trump Administration’s tariffs on steel and aluminum either means the celebratory clinking of glasses or wary knocking on wood.
The Twin Ports is coming off a good year, contributing to Minnesota’s export growth in 2017. According to figures released in March by the Minnesota Department of Employment and Economic Development, Minnesota businesses exported $21 billion worth of agricultural, mining and manufactured products in 2017, an eight percent jump from the previous year. U.S. exports increased seven percent during the same period.
The Duluth Seaway Port Authority reported a fair bump in total waterborne commerce in 2017, from approximately 30 million tons in 2016 to 35 million last year. Total vessel arrivals in 2017 were 838, up from 707 in 2016. In the Twin Ports, steel imports account for a little less than three percent of the total tonnage in any given year, and there’s no aluminum handled at all.
“Most recently, we’ve handled a few barge loads of steel coil, a shipload of steel pipe and a few shipments of structural steel,” said Kevin Beardsley, interim executive director, Duluth Seaway Port Authority. “In theory, with the new tariffs, that small amount of steel could go away, but we’ve had no indication that it will, particularly with the exemption for Canada and international trade agreements still being negotiated.”
On the flip side, said Beardsley, the Port of Duluth-Superior figures prominently in the nation’s steelmaking industry, with Minnesota ore accounting for 80 percent of U.S. first-pour steel. The vast majority of that ore moves through docks in the Twin Ports and Two Harbors.
As noted earlier, Canada has been exempted from the tariffs, at least until May 1, 2018, when the president will decide whether to continue to exempt Canada and other countries from the tariffs, based on the status of ongoing discussions. This potentially bodes well for the Twin Ports and the Great Lakes-Seaway system as a whole.
“Over 35 percent of Minnesota’s iron ore last year left the Port of Duluth-Superior aboard Canadian vessels – some for use in Canadian steel mills and the rest transloaded at Canadian ports for export overseas,” said Beardsley. “In addition to iron ore, in any given year on average, nearly 20 percent of the total tonnage moving through the Port of Duluth-Superior either comes from or heads to Canadian ports.”
On the Iron Range, the tariffs are being met with open arms, from steelworkers, business owners, politicians and steel executives and proponents.
“This is a great day for America’s iron mining industry, the domestic steel industry, and the workers, families, and communities that rely upon them,” said Kelsey Johnson, president of the Iron Mining Association of Minnesota. “The president’s decision is critical for our national security and our ability to support and improve America’s infrastructure going forward.”
Local state representatives, who have an eye on the economic well being of the Twin Ports, have been more mixed in their reactions. State Sen. Erik Simonson (DFL-7) noted the last crackdown of foreign steel had a positive impact on northeastern Minnesota’s economy, with taconite production and transportation of iron ore increased.
“Obviously, the actual impact (of the new tariffs) may not be known for some time,” Simonson said. “But it is my belief that transportation companies will adjust to the demand, and the benefit of the tariff will outweigh any negative consequences, at least as far as northern Minnesota goes as a world class taconite producer.”
State Rep. Jennifer Schultz (DFL-7A) believes the ramifications of the tariffs will be large and mainly unanticipated. She is particularly worried that this “shoot from the hip” reaction from the Trump administration could trigger retaliatory tariffs targeting important American exports, including agricultural products, heavy equipment, aircraft and high-end medical and technical equipment, some of which leave the Twin Ports.
“Flirting with trade wars and suggesting we can ‘win’ trade wars is particularly worrisome to people trained in economics,” said Schultz.
Dr. Sakib Mahmud – associate professor in Sustainable Management and Economics, and Academic Director, Sustainable Management Undergraduate Program, School of Business and Economics, University of Wisconsin-Superior – said the decision to impose the tariffs, in order to protect United States’ national security, has wider implications for Northeast Minnesota and Northwest Wisconsin. While steel tariffs will assist companies like U.S. Steel, mining companies on the Iron Range, and the shipping industry in the Great Lakes, for the Port of Duluth-Superior, the final outcome could be mixed.
“On one hand, the Twin Ports might experience handling more outbound locally produced cargoes that are shipping iron ores from Northeast Minnesota throughout the Great Lakes system to produce steel,” he said. “On the other hand, the Twin Ports might face a lack of activities on its handling of inbound cargoes of consumer and industrial products such as cement, salt, wood products, wind turbine components and other heavy equipment for energy-related projects, etc.”
Mahmud added that the latter is most likely to happen due to price increases and retaliatory tariffs introduced by major trading partners who are directly impacted by the decision.
“If loss in cargo volume is significant at the port, there will be loss of jobs that are directly and indirectly associated with cargo handling, starting from dockworkers down through the workers involved with the supply chain involving workers in other transportation and logistics sectors,” Mahmud said.
However, another thing economists like Dr. Mahmud agree on: Canada is the United States’ top export market.
“The trade relationship between Canada and the United States is fantastic!” said Canadian Consul General Paul Connors, who represents Canada in Minnesota, Iowa, Nebraska, North Dakota and South Dakota.
Connors also said that Minnesota is Canada’s number one customer and that much of that trade and investment relationship flows through and is in Duluth.
“What we like about Duluth is it’s the epitome of the Canada-U.S. relationship. You see a lot of Canadian companies in Duluth – Enbridge Energy, Canadian National – and Duluth-based businesses like Barr Engineering and Maurice’s have made investments in Canada. Canadian tourists visit Duluth frequently, Canadian Armed Forces demonstration teams have regularly performed at the Duluth Air Show, and together we protect Lake Superior and other shared waters.”
Connors cited a study from the University of Minnesota Duluth Bureau of Business and Economic Research that concluded iron ore mining is the industry in the Arrowhead most impacted by the trade relationship with Canada, in terms of employment, by a significant margin.
“That report found that, in 2014, more than 200 iron mining jobs in Minnesota were supported by trade with Canada,” said Connors. “It stands to reason that, as demand from Canada for iron ore grows, as it did by 212 percent in 2017, Minnesota mining jobs will follow.”
Connors also reiterated that Canada, as a key NORAD and NATO ally with the U.S., as well as the number one customer of American steel, would view any trade restrictions on Canadian steel and aluminum as absolutely inconceivable. Connors quoted the Canadian Foreign Minister’s statement that, if restrictions were imposed on Canadian steel and aluminum products, Canada would take responsive measures to defend its trade interests and workers.
Which is why, only days into the new maritime shipping season, Beardsley is knocking on wood.
“We understand the President’s desire to limit the dumping of foreign steel and aluminum into the U.S. market,” he said, “yet, there are concerns here in the Twin Ports about how broadly these tariffs will be imposed. This major shift in our nation’s global trade policy without targeted exemptions that protect our major trading partners and all commodities could have an unintended boomerang effect on our economy by triggering a retaliatory trade war.”