That was quite the exchange we saw over the weekend between Colombian President Gustavo Petro and U.S. President Donald Trump.

I wrote about it in Monday’s five-story summary, but I’m bringing it up again considering today’s topic: steel. The international “diplomacy” we just witnessed applies intensely to what’s going on in that industry.

To recap the Petro drama first, he initially agreed to repatriate Colombian nationals who had illegally entered the U.S. And so Trump sent the first of two such planes over.

Before they could land though, Petro saw images of a similar scene in Brazil, where the illegal immigrants were handcuffed. And that was apparently unacceptable, despite how this first wave of deportations is composed of serious criminals: drug traffickers, murderers, and the like.

So Petro sent the planes right back, declaring that “immigrants must be treated with… dignity.” Until they were, he wasn’t accepting anyone.

Unsurprisingly, Trump fired back with a slew of executive actions, including 25% tariffs… which would rise to 50% if Petro didn’t acquiesce within a week.

Despite ranting against Trump on social media platform X on Sunday – where he proclaimed himself to be stubborn and unafraid, the U.S. “a bit boring,” and Trump bent on ending “the human species because of greed” – it took mere hours for Petro to back down.

The U.S. gets to deport Colombian illegal immigrants. No ifs, ands, or buts about it.

Clearly, Trump means business, which begs the question… what else is he going to get his way with? That’s the question steel workers here and around the world are asking.

And it’s one I’m more than happy to explore.

Trump’s Tariff Threats Don’t Scare Me, Even About the Cost of Steel

The building and infrastructure industry, transportation or machinery manufacturing, energy production, or even some food and beverage packaging circles – all important areas of 21st-century life – are dependent on steel.

According to the World Steel Association, global crude production came in at 1.892 billion tons in 2023. As a country, China unsurprisingly produced the most at about 1.02 billion tons.

Mexico and Canada were 14th and 15th on the list, respectively, with just 16.2 billion and 11.4 billion. But Canada is the U.S.’ largest source of steel and Mexico its third… both of which have been particular targets of Trump’s tariff threats.

That’s why some steelmakers there are thinking twice about signing contracts with American businesses. As Bloomberg reported on Friday:

Trump this week signaled plans to impose previously threatened tariffs of as much as 25% on Mexico and Canada by Feb. 1. While the countries are exempt from a sweeping 25% steel tariff the U.S. imposed during the first Trump administration, there’s increasing concern that a carve-out won’t happen this time.

In fact, he just said Monday that computer chips, pharmaceuticals… and steel were all going to be specific tariff targets this time around.

This could obviously affect American life. Yet Trump’s weekend spat with Colombia has me calm as a cucumber on the subject.

For starters, it’s important to realize that Trump isn’t actually a tariffs fanatic. He does legitimately think certain countries should be penalized for their “shrewd” international business practices. But as I’ve said before and I’ll say again, he largely sees tariffs as a bargaining tool.

You want to tap into the profit power of the U.S. consumer? Then it has to be more agreeable to U.S. interests.

He demonstrated that mindset very clearly with Colombia. As soon as President Petro agreed to accept his repatriated citizens, Trump stayed his tariff order.

And I expect similar negotiating tactics with Canada and Mexico. Since those countries have hundreds of billions of reasons (i.e., dollars) to play ball, I expect the final steel import fee to be far below 25%.

The U.S. Steel Situation Just Got More Interesting

It’s also important to understand how there are U.S. companies that produce steel. In fact, according to the aforementioned World Steel Association, America was the fourth-largest producer in 2023 at 81.4 million tons.

That’s up from 80.5 million tons in 2022, so we’re clearly capable of improving our numbers. It just requires a different approach – something President Trump excels at. And under his unfolding agenda, U.S. entities will have a much greater range to try out alternatives as well.

Take U.S. Steel (X). Once the world’s largest steel producer, it now ranks No. 27… and is desperate to sell itself to Japanese competitor Nippon. This company is a classic victim of the outsourcing and imports mentality America has increasingly suffered under for generations.

Argue all you want that laws have been passed specifically to bulk up our steel industry. But what good are those when other laws simultaneously make it so easy for steel users to go elsewhere?

The result is a once-great producer with outdated facilities and underwhelming operations.

Yet U.S. Steel isn’t hopeless, despite what management is currently arguing in court after Biden blocked the deal last year and Trump has taken the same stance. Just ask Cleveland-based activist investor Ancora Holdings.

Lauren Thomas, my daughter, wrote about it in The Wall Street Journal yesterday: how the firm wants U.S. Steel “to turn the page,” oust its CEO, and stop trying to salvage the merger.

Ancora doesn’t want to sell the company at all. “Its priority is seeing through a turnaround of U.S. Steel in the public markets.”

And since it specializes in strengthening industrial and transportation companies – including turning bankrupted Canadian steelmaker Stelco around years ago – Ancora seems like it has a decent shot at succeeding if allowed to take the reins.

I expect the same can be said for the rest of the U.S. steel industry. It just needs new guidelines to excel, enabled at the highest level and implemented on the ground.

Really, it’s all about how you look at a problem. And when you look at it from a true MAGA perspective… which, yes, sometimes comes complete with a tariff threat or two…

There’s a very good chance it’s going to work out just fine.

Regards,

Brad Thomas
Editor, Wide Moat Daily

MAILBAG

Do you agree with Brad that the U.S. steel industry is not hopeless under the Trump administration? Write us at [email protected].