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Steel Tariffs Unexpectedly Work Against White House

September 28, 2003|Warren Vieth | Times Staff Writer

DETROIT — Before President Bush decides what to do about steel tariffs, he might want to square things with the 2 million metal-benders of America.

He could start with Tim Tindall or Mike Chubb.

Tindall, president of a company that makes brackets and springs for the auto industry, has laid off 17 employees since Bush imposed tariffs on imported steel last year, and he's struggling to retain the 85 people still on his payroll.

Chubb, an industrial engineer let go in March by a truck part maker, just wants another job. Any job. And a new president.

"Yes, I was a casualty of steel tariffs. Yes, I feel a great deal of bitterness," said Chubb, who survived previous rounds of industry contractions but senses that this loss is permanent. "Basically, my job went to Korea. It's not coming back."

The tariffs, put in place to protect companies and workers in steel-producing states such as Pennsylvania, have cost jobs in steel-consuming states such as Michigan. While the administration expected that the tariffs would not be well-received in international markets, it did not fully anticipate the backlash at home.

Tindall and Chubb live on the Michigan side of the tariff divide, a boundary that looms large in the complicated terrain of the 2004 presidential election campaign. For Bush, who is expected to decide soon whether to continue the tariffs for another 18 months, the divide could prove treacherous.

On one side are steel-producing states where Bush scored points by shoring up prices so that the ailing industry could attempt to get its affairs in order. Steelworkers want Bush to stick to his plan and keep tariffs in place until 2005, warning of industry turmoil and voter retribution if he changes course.

"If Bush wants to win Pennsylvania, he's got to stick to his promises," said Ron Davis, a member of United Steelworkers of America Local 9462 in Conshohocken, Pa. "That's the bottom line. We're not naive."

On the other side are heavy steel-consuming states, where higher prices compounded the problems of metal-bending firms already squeezed by a sluggish economy and foreign competition. Steel fabricators and auto-part makers want the president to end the tariffs at their 18-month midpoint, suggesting he faces an even bigger electoral revolt if tariffs stay in place.

"The tariffs have got the little guys all riled up," said Jim Zawacki, president of GR Spring & Stamping Inc. in Grand Rapids, Mich. "That's really going to hurt the president if he doesn't come out with the right decision. I think the steel issue could determine whether Bush gets reelected or not."

When Bush imposed tariffs of up to 30% on certain steel imports in March 2002, his economic advisors predicted that they would buy time for domestic producers to restructure without creating big problems for steel users, who were expected to pass along their higher costs in the form of modest price increases to consumers. The president's political advisors saw the tariffs as an opportunity to build support in pivotal steel-making states.

Things didn't proceed quite according to plan.

Spot market prices for some types of steel soared after tariffs took effect. Metal-bending operations such as Tindall's found that customers were not willing to absorb the higher costs. The tariffs were ruled illegal by the World Trade Organization, and the European Union is threatening $2 billion in retaliatory sanctions.

Although steel prices have fallen in recent months, the turmoil was enough to cause some smaller steel fabricators to lose contracts, post losses and, in some cases, lay off employees. Some analysts say they are convinced that the economic damage done on the steel-consuming side of the tariff divide is greater than the gains on the producing side. The political backlash from outraged steel users has proved more potent than the president's advisors had imagined.

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"They've all suffered," said Rep. Joe Knollenberg (R-Mich.), who is leading an effort by Michigan Republicans to rescind the tariffs. "The unintended consequences of this action have come back to bite us and to bite him."

For months, steel producers and consumers have been bombarding the Bush administration with dueling studies. Tariff opponents estimated that higher steel prices had eliminated 50,000 existing and potential jobs at fabricators and part makers, and as many as 200,000 jobs among a broader group of consuming industries. They blamed tariffs for much of the price increase.

Supporters argued that tariffs had restored 16,000 of the 50,000 jobs lost in recent years at bankrupt steel makers and preserved thousands of additional jobs in "upstream" businesses that provide goods and services to mills.

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