Trump cozies up to steel
Industry is surging under the president’s recent tariffs. But will its workers benefit?
“There was a lot of excitement here; there were a lot of us saying, ‘It’s about time someone is looking out for us,’ ” said Lattanzi, the mayor of this town of 7,000 and a safety inspector at the U.S. Steel plant in nearby West Mifflin. “A lot of people around here were saying, ‘We’re going to be OK.’ ”
Four months later, Lattanzi is less optimistic.
Production at U.S. Steel’s facilities has ramped up, and the company announced this summer that, thanks in part to the tariffs, its profit will surge.
But in interviews in recent weeks, Lattanzi and other steelworkers said they’re no longer confident they’ll take part in the tariff bounty.
“It’s been a little like watching the air going out of a balloon,” Lattanzi said.
As he has pressed his steel tariffs, Trump has declared that the industry is “being rebuilt overnight.” But the question facing the rank and file is whether the controversial policy — which has raised the price of inputs for many American companies and alienated allies — will translate into higher wages and better benefits.
While the effect of recent pacts — such as an agreement struck with Canada and Mexico recently to modernize the North American Free Trade Agreement — may take years to be fully understood, the steel industry provides a more immediate testing ground.
The initial anticipation of the tariffs, followed by their actual imposition, led the price of the metal to soar. Now, facing less foreign competition, domestic steel companies’ profits are ballooning. And, crediting Trump, the companies are making plans to open up new steel plants and hire more workers.
“The commitment that he has to steel is unprecedented,” U.S. Steel Chief Executive David Burritt said in August, after Trump visited a U.S. Steel plant reopening in Granite City, Ill. “He’s with us and we’re going to do everything we can to support him because this is not just good for U.S. Steel. This is great for the United States of America.”
Yet the trickle-down effects are far harder to predict. Steel companies, while supportive of the tariffs, have experienced wild gyrations in their business in recent years and can’t be certain the lucrative new protections will stick around. So even in this time of sudden prosperity, some analysts say, they must be disciplined with worker pay and benefits.
In southwest Pennsylvania, 15 miles from Pittsburgh, the question is coming to a head because labor contracts governing 31,000 steelworkers at U.S. Steel and ArcelorMittal, the largest steel company in the world, expired last month.
Workers say the new contracts represent the perfect opportunity for the companies to be more generous with their workers — who had given up raises just a few years ago when times were tough.
Frustrated by the lack of progress in negotiations, about 31,000 steelworkers at the companies voted last month to authorize a strike.
Though there were signs last week that they could reach an agreement, if the negotiations break down, it could bring about the industry’s first major work stoppage in four decades.
The steel industry was already in a period of renewal when Trump slapped 25% tariffs on steel imports. Trump acted in the name of national security, though he later justified the move as a way to help the steel industry rebuild.
The industry was enjoying gains driven by a strong economy, high demand to fix bridges and infrastructure after several major natural disasters, and an effort by President Obama to limit steel imports from China.
The tariffs sent the price of steel surging more than 33%.
“We have a strong U.S. exposure; clearly we are a net beneficiary of the trade actions,” Aditya Mittal, chief financial officer of ArcelorMittal, said in August, according to Bloomberg News. “It’s great to see the two things come together, the improvements we have made as a company as well as the improvements in the market.”
Trump has repeatedly cited the gains as one of the biggest upsides of his trade policy. After he visited the Granite City plant, video circulated of a steelworker being brought to tears by news of the plant’s expansion.
“Trump has supercharged [the sector] with broad-based tariffs,” said Phil Gibbs, a steel industry analyst at KeyBanc Capital Markets.
But while the tariff boon might provide new opportunities for jobs and boost corporate bottom lines, whether it can overcome longer-term factors affecting the livelihoods of steelworkers remains to be seen.
“Any reasonable observer who just goes on the economic facts will say: ‘This will not last forever,’ ” said Steven Kyle, an economics professor at Cornell University. “The tariff will temporarily make them more profitable. But we all know it could end at any time.”
Those longer-term trends help explain why, even during one of the best periods for the steel industry in recent memory, the negotiations between organized labor and steel companies here grew tense.
In its latest offer, U.S. Steel said it would give workers an immediate raise of 4%, followed by 3% annual raises later on. By the usual standards, that would be a good deal.
But at the same time, the company said it is wrestling with soaring healthcare costs in the long run. The company said that its healthcare costs are projected to rise to $20,000 per employee by 2019 and that it needs to start asking workers to absorb some of those — namely by paying $145 per month for healthcare. Workers haven’t paid premiums in the past.
The proposal represents “an incredible value under the company’s current proposal,” said Meghan Cox, a company spokeswoman.
But to the union, it was an upsetting plan. It would reduce the overall wage increase to just about 1.7% over nine years.
“We have done so much for this company, and now they have the audacity to bring before us all these concessions when they are projected to profit $2 billion this year alone,” said Michael P. Young, a maintenance technician at a U.S. Steel plant in Portage, Ind., and a survivor of colon cancer. “I want the company to leave my healthcare alone.”
Young and others were particularly furious because the work they do can be perilous to their health. Young ticked through the toxic substances he is exposed to while manning the production line, such as hydrochloric, sulfuric and chromic acids, as well as tin, zinc and the kinds of chromium used to plate metal objects.
“The bargain has always been that we work in very dirty, very dangerous, very unhealthy places, and in exchange we get good, quality health insurance at affordable prices,” said Cliff Tobey, who helps mine for iron ore at U.S. Steel’s facility in Hibbing, Minn.
It’s not clear how much leverage the workers will have. While at least temporarily protected from foreign competition, U.S. Steel is facing increased domestic competition from steel shops without unions.
The percentage of steelworkers who are in a union fell from 36% in 2000 to 24% in 2017, according to the left-leaning Economic Policy Institute. Union steel jobs pay more than 10% more than nonunion jobs, according to the institute.
Gibbs, of KeyBanc Capital Markets, says U.S. Steel also needs to invest in upgrading its plants and facilities — adding new technologies that require fewer workers.
But many workers don’t see why they shouldn’t share more in an economic upswing. In 2015, when prices were sloping steadily downward, U.S. Steel executives declared “extreme economic times” and urged the union to freeze worker pay. Members agreed.
Jim Borkowski, a father of two, frequently works 16-hour “double shifts” in very high temperatures at the U.S. Steel plant in Clairton, overseeing oven batteries that screech and wheeze so loudly he wears both earplugs and earmuffs.
Ownership “got a huge tax cut, and the tariffs are lining their pockets,” said Borkowski, 33, still gleaming with sweat in his orange flame-retardant pants. “We are ready to get our fair share.”
The coming months could provide a strong indication of whether workers like Borkowski will be satisfied.
The steelworkers union said Wednesday that it had seen “significant progress” in negotiations with U.S. Steel.
“We’re still negotiating for a fair contract,” said Lattanzi, the Clairton mayor and steelworker.