Safeguards, China, and the Price of Steel

The economic health of the US steel industry has fluctuated enormously over the last ten years. The implementation of steel safeguard tariffs in 2002 brought intense scrutiny by academics and industry observers, but little empirical work has focused on the factors that led to the industry’s dramatic reversal of fortune in the period that followed. We use a panel data set of product-level monthly price observations between 1997 and March 2005 to test the importance of the safeguards compared to other possible determinants. We find little evidence that the safeguards affected steel prices in the United States. Instead, results indicate that declining production capacity, improved macroeconomic conditions, and a falling dollar helped return prices to healthier levels. Finally, China’s demand for imported steel, which has not been included in previous empirical studies on the US steel industry, also appears to impact prices, but only after a lag of more than six months.