November 2018 - Weighing economic costs versus benefits is something that business owners must do every day. In many cases, the circumstances surrounding the cost part of the equation is beyond their control and it’s necessary to provide notice to officials of the facts on the ground.

Robin K. Weiner, president of the Institute of Scrap Recycling Industries, Washington, D.C., penned a letter on behalf of members in mid-August to Commerce Secretary Wilbur Ross and U.S. Trade Representative Robert Lighthizer.

In it, Weiner expresses the U.S. scrap recycling industry’s concern with the administration’s approach as it manages the U.S.-China trade relationship, particularly with regard to the use of tariffs on imports from China.

“I echo the many messages you have received from businesses all across our country that will face economic costs—not benefits—as a result of these tariffs. The Chinese government’s perception that it must respond in kind has further deepened the struggles”  the U.S. industry already faces due to import restrictions on scrap and recyclable materials that China put in place at the beginning of 2018.

While ISRI generally supports the findings of the administration’s Section 301 review of China’s investment policies, “the lists proposed for import tariffs on Chinese goods already have become a significant financial burden to our industry.” That list includes auto shredder wear parts, of which about 85 percent are sourced from China and thus “represents one of the largest financial outlays for the 300-plus auto shredders in 44 states.”

ISRI will submit an exclusion request for these parts, and urges the administration to grant that exclusion in order to save tens of millions of dollars and thousands of jobs in the shredder industry.

Retaliation

In response to the Section 232 tariffs the U.S. imposed on aluminum and steel, China imposed a 25 percent tariff on American aluminum scrap that—combined with the quality and quantity restrictions China had already imposed on scrap imports—“has resulted in a 20 percent drop in U.S. aluminum scrap exports in the first half of 2018 over the same period in 2017.” And in August, the Chinese government announced a retaliatory package of 25 percent import tariffs on fill scrap commodities in response to USTR’s announcement of the Aug. 23 imposition of the second list of [targeted] imports.  That trade totaled $2.2 billion in the first half, Weiner writes. “Moreover, aluminum scrap was once again on the list, creating speculation that China’s tariffs on aluminum scrap exports from the United States are now at 50 percent.”

Feeling strain

The combined strain on the U.S. recycling industry of China’s import restrictions and the tariffs imposed by both the U.S. and Chinese governments will have a damaging effect long-term on our industry’s competitiveness and the health of the manufacturing supply chain, Weiner asserts. The recycling industry processes 130 million metric tons of recyclable metals, paper, plastic, tires and rubber, electronics, glass and textiles every year and contributes $117 billion to the U.S. economy.

The tariffs and related trade tensions between the U.S. and China are also affecting industry employment, the letter continues. The U.S. scrap recycling industry supports 534,506 jobs and generates $13.2 billion in tax revenues. “Many of those jobs and the associated tax revenue are at risk if the tariffs continue for any extended period of time.”

The recycling of scrap is the first link in the manufacturing supply chain, responsible for meeting  40 percent, on average, of  manufacturing needs (more for steel and aluminum). The financial burdens being imposed on the industry through these tariffs means that less material can be processed and, thus, less inputs to manufacturers. As an example, auto shredding companies process an average of 365,000 metric tons of steel and aluminum scrap each day, but with the 25 percent import tariff on auto shredder wear parts from China, that number is declining and less scrap is reaching U.S. steel mills and aluminum smelters.

“We respectfully request that every effort is made to return to the negotiating table with China to find a path forward in our trading relationship,” Weiner’s letter states. “I wish to reiterate that we support the administration’s free and fair trade policy and efforts to pressure China to engage in fair commerce. But the absence of cooperation to resolve disagreements is creating much harm to our industry and our manufacturing customers.” MM