In America’s Rust Belt, the effects of Trump’s trade war are already being felt

The hulking Republic Steel mill that dominates the landscape of Lorain, Ohio, was supposed to be ground zero for the industrial renaissance President Donald Trump promised during his first term.

Once the heart of a thriving manufacturing city, the mill employed 12,000 people at its peak in the 1970s, but years of decline left it idled by 2016. Yet after Mr. Trump imposed tariffs on foreign steel in early 2018, including shipments from Canada, Republic said it would fire up its electric arc furnace to meet surging demand for American metal.

Mr. Trump was quick to take credit. “Thanks to our tariffs, idle factories throughout our nation are roaring back to life. Republic Steel is bringing back 1,000 jobs in Ohio,” he boasted later that year, repeating the claim regularly until he left office.

The revival never happened. On Wednesday, the rusting ruins of the mill evoked an apocalyptic wasteland – drones the city sent over the site last year revealed collapsed roofs and overgrown vegetation.

Now Mr. Trump is back, wielding even heftier tariffs and rehashed visions of restoring American manufacturing to its past glories. Yet during a Rust Belt road trip this week across Michigan and Ohio – swing states that voted for Mr. Trump last November – a mood of ambivalence and paranoia was palpable in the early days of the trade war.

It’s easy to see why: Mr. Trump’s earlier promises of a manufacturing comeback largely didn’t pan out. And the flailing rollout of his tariffs this time has forced many businesses to put investments and expansion plans on hold until they have certainty on costs.

Last Tuesday Mr. Trump imposed 25-per-cent broad-based tariffs on imports from Canada and Mexico, which he partially walked back two days later by lifting the tariffs from goods covered by the United States-Mexico-Canada Agreement, including vehicles and auto parts, until April 2.

Next Wednesday, another leg of the trade war is set to kick off when existing tariffs on steel and aluminum imports into the U.S. are expanded to include countries such as Canada and Mexico, and those in the Europe Union, which had received exemptions from those tariffs. Aluminum tariffs of 10 per cent will get cranked up to 25 per cent, in line with existing duties on steel.

Jack Bradley’s mind isn’t on the coming steel and aluminum tariffs, even though he’s the mayor of Lorain and this community just west of Cleveland is historically associated with the industry. Instead, Mr. Bradley was in Washington last week as part of a binational lobbying effort by the Great Lakes and St. Lawrence Cities Initiative to oppose broad-based tariffs on Canadian goods – and to avoid countertariffs from Canada.

“A blanket tariff on Canadian goods is not good economically for either the United States or Canada,” he said, noting his region is home to auto parts manufacturers that rely heavily on cross-border supply chains. “The American consumer will be hurt by these blanket tariffs and that may result in an actual loss of jobs in our communities.”

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Across the region, companies are struggling to find their balance amid the rapid-fire and often contradictory tariff messages coming from the Trump administration.

“It’s just chaos in the market. People have stopped trying to figure it out. They’re freaked out and waiting,” said Scott Bernstein, the president of Beta Steel LLC in Sterling Heights, Mich., a suburb north of Detroit.

In the company’s facility, hundreds of large coils of steel wire, which it largely gets from U.S. and Canadian mills, wait to be processed before being sent in turn to Beta Steel’s customers, who manufacture fasteners such as bolts. Half of its processed steel is used in vehicle manufacturing.

With steel prices set to rise, the company has already moved to using domestic steel to meet many of its customers’ needs. “This is going to blow a huge hole in the Canadian steel mills in the second quarter as we’re waiting for the ground to settle underneath everybody,” he said.

At the other end of Lake Erie, in Buffalo, the frustration with Mr. Trump’s tariffs and the fallout for the rest of the economy pours out of Rick Smith, the president of Rigidized Metals Corp., an 85-year-old company that produces textured metal surfaces for elevators, aerospace companies, food manufacturers and other industries.

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“The government will make dough but the big steel mills are the really big winners, while us smaller manufacturers pay the price,” said Mr. Smith, who added it’s too early to know how much of the higher price of steel his company will have to swallow versus how much it can pass on to its customers. The result is the same: less money for big equipment purchases or expanding its work force.

What irks him more is that Mr. Trump – or as Mr. Smith repeatedly refers to him, Donny Dump – is targeting Canada, where Rigidized Metals has close ties with suppliers and customers. He occasionally flies the Canadian flag outside the business. “At least with China there’s a point to levelling the playing field,” he said. “But there weren’t any unfair trade practices with our neighbours, so what are we doing? It doesn’t make any sense.”

Not surprisingly, American steelmakers are thrilled with the tariffs. “We thank the Trump administration to have the courage to implement these tariffs,” said Lourenco Goncalves, chief executive officer of U.S. steelmaker Cleveland-Cliffs Inc., during a recent earnings call with investors.

As they did during Trump 1.0, big producers such as Nucor Corp., Cleveland-Cliffs and U.S. Steel have moved quickly to boost steel prices even though steel tariffs have yet to take effect. Nucor has raised its consumer spot price for hot-rolled coil steel by nearly 20 per cent since the start of the year, according to Steel Industry News.

Watching all this with unease are Canadian steelworkers. Last July, Cleveland-Cliffs acquired Stelco Holdings Inc. and its two Canadian mills, one in Hamilton and one on the shores of Lake Erie, with the deal receiving final regulatory approval just days before the U.S. election.

In late February, a group of union members of the Hamilton mill gathered in a boardroom in their union hall, next to a blown-up photo of a 1946 newspaper headline that trumpeted that year’s massive steel strike, to watch their new boss speak with investors.

Mr. Goncalves insisted the tariffs would also benefit Stelco – “that’s right, despite what some might assume.” He argued that 2018, when Canadian steel was still subject to 25-per-cent import tariffs, was the company’s best year that decade because the steel it continued to sell in Canada reflected higher U.S. pricing.

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Watching the conference call video, Ron Wells, president of United Steelworkers local 1005, was skeptical based on his reading of the limited financials Stelco released last decade, when the company was in creditor protection from 2014 to 2017. “What he said wasn’t a lie, just a little misleading,” said Mr. Wells.

The effects of the tariffs are already being felt, he said, with the company’s order book slowing, a freeze on new hires and overtime opportunities drying up. Fortunately, Cleveland-Cliffs signed an agreement with Ottawa to maintain employment levels for five years, though the exact terms are unclear.

“People are concerned, but I think they’re more pissed off with the things Trump is saying than fearful about losing their jobs,” he said.

During the early days of the second Trump presidency, there is a distinct sense that Americans would rather not comment publicly on economic policy and risk raising the ire of the White House. This is not only the case for critics of the Trump administration, but also beneficiaries of the tariffs.

Employees approached by a Globe and Mail reporter near Cleveland-Cliffs’ sprawling Cleveland Works mill south of the city’s downtown waved off questions and rushed away. Calls to the executive at the United Steelworkers’ local office went unreturned, and a visit to the union hall prompted members to call corporate security.

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Similarly, upon hearing that a Canadian reporter was on the phone with a request to meet in person, the head of one Pennsylvania wire manufacturer said he didn’t want his name or that of his company used in any story about Mr. Trump’s tariffs.

That didn’t stop the executive from complaining that steel producers have jacked up prices and griping that all of this could have been avoided if Canada didn’t allow what he described as thousands of terrorists to cross freely into the U.S.

It’s common to hear Mr. Trump’s misleading assertions or outright lies about Canada echoed by his supporters across the Rust Belt region.

In a Home Depot parking lot in Detroit, Sal Tobiya, a mechanic who backed Mr. Trump in the last election but considers himself an independent, was emphatic when asked if the tariffs will work. “100 per cent,” he said, before explaining how car companies are outsourcing work to countries that use slave labour.

Did he mean Canada?

“No, you guys are doing, I heard something about it’s US$200-billion, maybe US$250-billion,” he said before trailing off.

Those numbers, of course, reflect Mr. Trump’s false claim that the U.S. is “subsidizing Canada by US$200-billion or US$250-billion a year” in the form of America’s trade deficit with Canada.

In reality, last year the U.S. trade deficit with Canada was US$63.3-billion, and once energy products were excluded, the U.S. swung to a trade surplus, as it has every year since 2007.

But that’s hard to explain succinctly in a hardware store parking lot to an American who is more interested in discussing the “super hypothetical” of Canada becoming the 51st state: “It wouldn’t be like a complete takeover. Obviously, Canada would still have its own government.”