Tariff's will hit oilfield pipe business hard

Fuel Fix:

Max Tejeda hoped his oilfield pipe business would find some financial relief in bigger paychecks this year as drillers recuperate from the worst downturn in decades.

But the owner of Houston-based Tejas Tubular Products said the Trump Administration could dash his hopes for a recovery if it follows through on a proposal made this week to impose a 25 percent tariff on imported steel, a high cost for an industry that buys most of its metal from overseas.

"We're going to be less competitive than we were before," Tejeda said. "I'm wearing my red 'Make America Great Again' hat. But he blew it on this one."

President Donald Trump's plan to protect U.S. steel makers and squeeze foreign rivals, announced on Thursday, would almost certainly hike costs for Houston's oil companies, which use thousands of tons of steel in drilling, refining and pipeline operations to literally make the local economy go. In the West Wing on Thursday, Trump said he planned to sign executive orders imposing the steel tariffs and a 10 percent tariff on imported aluminum next week. He can do so without approval from Congress after the Commerce Department established in a recent study that steel imports are a threat to national security because, investigators said, they are "weakening our national economy."

In Houston, the steel tariffs could complicate the so-called second wave of chemical plant construction expected in coming years across east Houston and the Gulf Coast, after some $60 billion in local petrochemical projects wind down.

Eighty-nine iron and steel mills, foundries and nonferrous metal producers with 2,200 employees in Houston would benefit from American steel protectionism. But that's less than a tenth of 1 percent of the region's workforce. More than 2,200 manufacturing companies in Houston, with over 88,000 employees, buy metals to make hardware, industrial machinery, turbines, parts for vehicles and other tools, and all would see raw materials costs surge under Trump's plan.

The cost of manufacturing equipment, building construction, automobiles and appliances made with steel could ultimately fall on consumers, and absorbed by manufacturers in the form of smaller profits.
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This will be a hit to the Texas economy similar to the one during the oil downturn.  If this tariff is supposed to work to grow business in the US American steel producers are going to have to step up in a big way to supply the industries that use steel.