November 2021 Volume 3

WASHINGTON UPDATE

what Eugenio was saying about putting a tariff on a finished forging coming into the U.S. would probably be a blanket solution that most companies could get behind. FIA Magazine: If you had a magic wand, based on your experience over the last few years and the economics of the moment, what would you both like to see happen? For Trenton Forging and the industry. Lantto: I mean, pie in the sky is that the U.S. would become the preferred forging supplier globally because we're competitive, our quality is the best, and our delivery times are the best. But obviously, all that supply chain infrastructure needs to be stateside as well. We don't want to be competing with China or India or Turkey. We want to be competing domestically. Calle: China is effectively dumping forgings in North America, and they have been for the last 10 to 12 years. The playing fields are not level. All we're asking for is that the playing fields be leveled, that we have a fair chance at competing for the business of the forging components that are ultimately consumed in North America and purchased by U.S. citizens. So that would mean the size of government action, in terms of protecting the local manufacturing industries and the entire supply chains, needs to be decisive, and it needs to be clearly communicated to everybody involved in that supply chain to allow us to make long term investment plans. The forging industry in theU.S. has been shrinking over the last 30 years. And if we continue this trend, pretty soon we're going to be in the same situation as microchips. We used to manufacture 80 percent of the world's microchips. Today, we're down to 12 percent. If we in the forging industry one day soon wake up and we're at 12 percent, it's going to be too late. Because forging is not a fashionable industry. But it's a vital industry. And to build it back from 12 percent is going to be nearly impossible. Lantto: Can I add one thing that I think is really important? We need the rest of the industry to feel the same urgency that we're feeling. We can't do this alone. Trenton is 90 people. We are a tiny player in the grand scheme, and we need to get the entire supply chain on board. And that starts with greater industry involvement with the FIA. What Happens Now? The Section 232 tariffs have created tension with key U.S. allies, especially the European Union. Last spring, the U.S. and the EU announced that they would attempt to negotiate a resolution of the tariffs. Recently, the U.S. proposed a tariff rate quota (TRQ), under which agreed upon volumes of steel and aluminum could enter the U.S. market duty free. Once that threshold was met, the 10 percent and 25 percent Section 232 tariffs on steel and aluminum would kick back in. While the EU initially balked at the idea of a TRQ, both sides appear to be negotiating in good faith and the intensity of the talks has increased of late, suggesting that a deal is in reach. Unless the issue is resolved, retaliatory EU tariffs on a range of U.S. products from bourbon to boats to motorcycles will double on December 5th. This action forcing event, coupled with the desire to

get past this trade friction and focus on the bigger concern – China – is driving the talks toward resolution. We will be watching these negotiations closely and scrutinizing any agreement that is reached. Key issues will include whether the TRQ for different types of steel and aluminum is sufficiently large and flexible to address U.S. demand and whether the TRQ will create the certainty and predictability that steel and aluminum users need. Relatedly, it will be interesting to see if the U.S. uses a similar model to resolve the Section 232 tariffs on Japanese and Korean steel and aluminum imports, two other close allies key to containing Chinese ascendancy. From our vantage point, the road ahead can take three paths: one, the administration can rescind the current tariffs (unlikely right now); two, it can leave the tariffs in place as they currently stand (most likely scenario); or three, it can look to adjust the tariffs into a regime that gives greater balance to the economic realities of the moment (better odds than full recission, but still hard to see this happening any time soon). But if President Biden decides on that third way, it remains to be seen whether tariffs on finished forgings are on the table. SAVE THEDATE: LOBBY DAY 2022 The Forging Industry Association’s 2022 Lobby Day is set for February 2nd and 3rd next year in Washington, D.C. This would be a key opportunity for members to impress upon their elected officials how critical forgers are to the North American economy and how dealing with the dumping of cheap, finished forgings is causing problems for our industry. ■ Steve Haro is Principal at Mehlman Castagnetti Rosen &Thomas and can be reached at sharo@mc-dc.com

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FIA MAGAZINE | NOVEMBER 2021