UK small businesses calculate cost of prolonging Trump-era steel tax

Somers Forge, a manufacturer custom steel parts for the aerospace, automotive and nuclear industries based in the English Midlands, having operated sales offices in the United States for over 30 years.

In April, the branch will close, a victim of steel import duties previously imposed in 2018 for national security reasons by then-President Donald Trump.

“We persevered and held firm in the hope that our government would succeed in revoking them [the tariffs],” said Tammy Inglis, chief financial officer at Somers Forge, one of Britain’s largest forging specialists. “We are now in our fourth year and with all the added production costs, especially high energy costs, we cannot subsidize the branch anymore. It is not sustainable.”

Under the terms of the tariffs, US importers can apply for exemptions on certain products if they are not sourced locally but Somers Forge is among dozens of UK small and medium experts. has been affected. Trade body UK Steel estimates exports to the US have fallen from 351,000 tonnes in 2017 to just over 190,000 tonnes in 2020.

The US and EU last October agreed to suspend tariffs – 25% on steel and 10% on aluminum for producers from the bloc – from January 1, but the UK government has failed to guarantee it. secure a suitable breakthrough.

The UK industry is already at a competitive disadvantage with European countries due to higher energy costs, an issue that has become even more important given the recent spike in wholesale electricity and gas prices. . Somers Forge is among companies that have raised concerns with the government about costs.

Japan on Monday achieved a Similar deal with the US, with Washington announcing that it would suspend a 25% tariff on certain quantity imports. The deal does not include aluminum.

The Financial Times reported in December that the United States has delay a deal with the UK over concerns about London threatening to change post-Brexit trade rules in Northern Ireland. Negotiations between the UK and US on the matter resumed last month but for Somers Forge a deal, even if it arrives this month, will be too late to reverse the decision to close the site. their Michigan-based web site.

Tammy Inglis, CFO at Somers Forge
Tammy Inglis: ‘We persevered and held out in the hope that our government would succeed in revoking them [the tariffs]’© Somers Forge

Bright Steels, a family-run company in Yorkshire that manufactures steel bars for use in precision mechanical applications, exports between 50 and 60 percent of its production, including to the US. Philip Jackson, the chief executive, said the company has lost business to EU rivals as well as US domestic manufacturers due to the tariffs.

He said he still hopes that if an agreement is signed soon, the company can still recover some of that volume.

James Brand, foundry operations manager at United Cast Bar, a cast iron specialist that runs a foundry in Chesterfield, last year decided to roll out a new size range at its Spain site to avoid taxed at 25%.

“We heard that a trade agreement was getting closer between the US and the EU, so decided to do that scale in Spain,” he said. “It’s business lost from the UK.” Brand says that if a deal can be done quickly, the company could bring some of what has been shipped to Spain to the UK.

John Healey, a Labor MP based in Yorkshire, who has campaigned extensively on behalf of industry, said: “Britain is being left behind and torn. “People have the right to expect better from the government. Incompetent ministers are costing steelmakers, and the UK is continuing to lose ground in the major US market.”

Gareth Stace, UK Steel’s General Manager, warned that the removal of tariffs was “essential to the UK steel industry’s competitiveness in this key market and to recovering lost sales”.

While US customers have been “reasonably successful” in securing an exemption to allow them to continue to import UK steel duty-free, Stace added that “even this could be threatens if those customers, tired of waiting for a UK deal, determine that sourcing from the EU reduces regulation and increases certainty for them”.

Britain’s biggest manufacturers warn of business opportunities lost to the impact of the tariffs. “Excluding demand for individual products and customers means that” we are very limited in our ability to compete with existing customers and provide new business opportunities,” said Tata Steel. “.

Tariffs are an added burden that manufacturers may not be able to handle at a time when soaring wholesale electricity and gas prices have eroded profit margins. Although most companies have long-term contracts, many worry that persistently rising prices may reduce the competitiveness of companies. Government so far stopped helping users to use a lot of energy.

UCB’s brand said he expected his energy bill to increase from 10-12% of operating costs last year to 20% by the fall of this year. The company is trying to pass on some of the additional costs but “this ultimately means higher prices for consumers”.

A wormhole being produced at Somers Forge

Somers Forge has been hit hard by US steel tariffs, as well as rising energy costs © Matt Holmes / Visual 8

At Somers Forge, Inglis said the company typically buys energy 18 months to two years in advance. Hedging has helped shield the business from last year’s peak but the outlook for this year is less certain as Inglis has only pegged 25% of the company’s demand from March onwards. “We’re getting more and more exposed.”

The Department of International Trade said negotiations with the United States had begun and that their focus was “on achieving a prompt resolution that would remove these tariffs in a timely manner and clear the way for the ongoing trade relationship.” Our development grows”.

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