Lifting of Tariffs Is a Win for State’s Steel Importers

Dale Congelliere cheered when he learned that President Bush had scrapped the controversial U.S. tariffs on imported steel.

The president of Crenshaw Die & Manufacturing Corp. in Irvine said his raw material costs shot up 35% after the tariffs were imposed in March 2002. He blamed escalating steel prices for making his metal stamping company uncompetitive in some areas, saying they contributed to a painful decision to forgo year-end bonuses for his 80 employees.

Now that the tariffs are ending, Congelliere said he was hopeful about his business, which consumes 6 million pounds of steel a year. “I’m excited,� he said.

From stamping plants throughout Southern California to huge steel-consuming operations such as the joint Toyota-General Motors auto plant in Fremont, many manufacturers in the country’s most trade-dependent state applauded the White House’s decision to repeal the tariffs 16 months before the protections were to end.

Despite protests from the domestic steel industry and labor unions, the Bush administration said Thursday that the tariffs were being removed because the U.S. steel industry had used the “breathing space� to restructure and was strong enough to face foreign competition.

Supporters said the decision -- which followed a ruling by the World Trade Organization that the tariffs were illegal -- would put a brake on rising steel prices, reduce the threat of a costly trade war and provide a boost to the U.S. economy.

Steel users expect high demand from China to keep steel prices from collapsing but hope the lifting of the tariffs will keep a lid on costs.

“This doesn’t mean we’re getting big price decreases, but we’re hoping it brings price stability,� said Dennis Cuneo, a senior vice president with Toyota Motor Corp.’s North American operations, whose steel bill jumped $100 million after the duties took effect. “If the tariffs remained in effect, we fear prices would’ve gone up.�

Bush’s action was a major victory for California Steel Industries, a Fontana-based steel mill that imports 2 million tons of steel slabs a year.

Vicente Wright, president of the firm, said the cost of steel slabs, which California Steel turns into galvanized pipes and other finished products, jumped two-thirds after the tariffs were imposed.

“It’s the right decision,� he said. “The market should dictate its own rules.�

Another beneficiary was Los Angeles-based Reliance Steel & Aluminum Co., one of the country’s leading metal processors and distributors, which saw its stock price jump $1.17 to $31.87 on Thursday, a 52-week high.

It isn’t just steel importers and users that stand to benefit in California. The European Union, Japan and China -- three of the state’s top trading partners -- had threatened to retaliate against the steel tariffs with punitive penalties against billions of dollars in U.S. exports. Europe was set to impose $2.2 billion in tariffs later this month on a lengthy list of products, ranging from underwear and citrus fruit to steel.

Claire Smith, a spokeswoman for Sherman Oaks-based Sunkist Growers, said a trade war extending from Europe to Asia would have been “extremely harmful� for the company’s 6,000 growers, which already face high tariffs from countries such as Japan and South Korea. Foreigners bought one-third of the $800 million in fresh fruit sold last year by Sunkist.

Economists said the president’s decision was particularly well-timed for California, whose economy has shown signs in the last month that it may be emerging from its tech-driven collapse. Job growth and exports were up in November, and even hard-hit manufacturers of computer and telecommunications equipment are reporting improved orders.

In addition to the ripple effects of cheaper steel, California will benefit from any improvement in the global trade picture as the leading gateway for Asia’s large steel-producing countries and home for the nation’s largest container port.

“It’s great news for us,� said Ross DeVol, a regional economist with the Santa Monica-based Milken Institute. The removal of the steel tariffs “could provide one more area of strength for an economy that appears to be recovering already.�