Trump's tariffs could ricochet on coal country

President Trump's steel and aluminum tariffs may invite retaliation against American coal, an industry he promised to...

Posted: Mar 6, 2018 3:41 PM
Updated: Mar 6, 2018 3:41 PM

President Trump's steel and aluminum tariffs may invite retaliation against American coal, an industry he promised to revive.

Surging exports have been one of the only recent bright spots in beleaguered coal country. Demand in the United States has shrunk because of competition from natural gas and renewable energy, but the appetite for coal is strong in the fast-growing economies of Latin America and Asia.

But coal country could be harmed if Trump follows through on a vow to impose a 25% tariff on steel imports and a 10% levy on aluminum.

Brazil, a major exporter of steel to the United States, has already hinted at retaliation. Brazil's Industry Ministry warned last week that it may take action to "preserve its national interest" in response to Trump's tariffs.

The statement pointedly noted that Brazil is the largest importer of U.S. metallurgical coal, the type used in steelmaking.

To feed its steel industry, Brazil imported 5.2 million metric tons of so-called met coal through the first three quarters of 2017, according to the U.S. Energy Information Administration. That easily made Brazil the biggest customer for American met coal.

"If someone is trying to retaliate, coal would be an easy target given the president's support toward the industry," said Andy Roberts, a coal analyst at energy research firm Wood Mackenzie.

The threat is bigger than a possible Brazilian tariff. If the Brazilian steel industry suffers because of Trump's tariffs, that could dry up demand for the American coal that Brazil uses to make it.

Related: Oil CEO: Tariffs will help OPEC, hurt U.S. jobs

The good news for coal is that Trump's tariffs could provide a boost as long as there is no retaliation.

If American steelmakers ramp up production to meet increased demand caused by the tariffs, they will probably need more met coal to make the steel.

Higher aluminum output could also increase demand for electricity, which would require more of the thermal coal used by power plants.

But it all depends on how angry American trading partners will react.

"A trade war of any kind in the long run hurts all parties," Roberts said.

Concerns about a trade war have led centrists in the White House and in the business community to try to talk Trump out of the tariffs. It's not clear when a final decision will be announced.

Despite caution from analysts about coal's deep troubles, Trump made saving the industry a rallying call during his 2016 election campaign. "Get ready, because you're going to be working your asses off," Trump told coal miners in a May 2016 speech.

Tony Scott, managing director of analysis at research firm BTU Analytics, said coal would certainly be exposed in a trade war.

"This is a political game: You're trying to undermine an individual's constituent base," said Scott.

The European Union has already threatened to retaliate by imposing tariffs on motorcycles made by Harley-Davidson, which is based in House Speaker Paul Ryan's state of Wisconsin. The EU also targeted jeans made by Levi's, a company based in Minority Leader Nancy Pelosi's home city of San Francisco, and bourbon whiskey - a beloved business in Senate Majority Leader Mitch McConnell's home state of Kentucky.

Related: Coal country shouldn't count on a Trump-fueled comeback

Trump's deregulation agenda has so far failed to engineer a turnaround for coal, which remains under heavy pressure from natural gas and renewable energy.

The coal industry's saving grace has been foreign demand. The EIA estimates total U.S. coal exports reached 95 million metric tons in 2017, up 58% from the year before.

"The U.S. coal market has gotten some respite from exports while domestic demand has declined," said Dan Klein, managing director of coal analytics at S&P Global Platts.

Murray Energy, a leading producer of thermal coal that has been ramping up exports, is in favor of Trump's tariff plans.

"We fully support the action taken by President Trump to protect steel and aluminum producers in the United States," Murray Energy said in a statement. Robert Murray, the company's controversial CEO, has been a vocal supporter of Trump's efforts to revive coal.

Murray said the "countermeasures" proposed by Brazil "would not directly impact Murray Energy" because it does not produce met coal.

Major met coal producers such as BTU Energy and Arch Coal did not respond to requests for comment.

Mississippi Coronavirus Cases

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Reported Deaths: 7228
CountyCasesDeaths
DeSoto21496257
Hinds20294414
Harrison17814309
Rankin13573278
Jackson13411246
Madison10066217
Lee9962173
Jones8364163
Forrest7649152
Lauderdale7181240
Lowndes6370145
Lamar621686
Lafayette6171118
Washington5323133
Bolivar4797132
Oktibbeha461498
Panola4561105
Pearl River4499145
Marshall4397103
Warren4380121
Pontotoc419572
Monroe4100133
Union409076
Neshoba4026176
Lincoln3950110
Hancock377786
Leflore3487125
Sunflower335790
Tate332484
Pike3301105
Scott315373
Alcorn311968
Yazoo310769
Itawamba299477
Copiah296465
Simpson294788
Coahoma294379
Tippah287768
Prentiss279560
Adams269582
Marion268880
Leake266273
Wayne262341
Grenada260386
Covington256381
George246848
Newton246061
Winston226881
Tishomingo225967
Jasper220848
Attala214173
Chickasaw207157
Holmes188673
Clay184754
Stone182033
Tallahatchie178140
Clarke177879
Calhoun170132
Yalobusha163337
Smith162234
Walthall133845
Greene130333
Lawrence128323
Montgomery126742
Noxubee126734
Perry125938
Amite122842
Carroll121728
Webster114532
Jefferson Davis106932
Tunica104826
Claiborne102230
Benton99125
Humphreys96133
Kemper95428
Franklin83623
Quitman80216
Choctaw76118
Wilkinson66930
Jefferson65428
Sharkey50317
Issaquena1686
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Alabama Coronavirus Cases

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CountyCasesDeaths
Jefferson763971520
Mobile40908804
Madison34717503
Tuscaloosa25730452
Montgomery24314588
Shelby23401249
Baldwin21107307
Lee15856171
Calhoun14488314
Morgan14282279
Etowah13819353
Marshall12210223
Houston10557280
Elmore10044205
Limestone9954150
Cullman9649193
St. Clair9644242
Lauderdale9419241
DeKalb8825185
Talladega8214175
Walker7223277
Autauga6918108
Jackson6804112
Blount6651137
Colbert6292134
Coffee5506119
Dale4828111
Russell440638
Chilton4279112
Franklin425582
Covington4118118
Tallapoosa4019152
Escambia393276
Chambers3559123
Dallas3547151
Clarke350861
Marion3113100
Pike310577
Lawrence299898
Winston274072
Bibb260464
Marengo249264
Geneva249077
Pickens234160
Barbour230757
Hale222677
Butler215969
Fayette212062
Henry188744
Cherokee184445
Randolph179941
Monroe177340
Washington167039
Macon158750
Clay156156
Crenshaw152057
Cleburne148741
Lamar141934
Lowndes138653
Wilcox127030
Bullock123041
Conecuh110129
Perry107526
Coosa107128
Sumter104332
Greene92334
Choctaw60424
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