President Trump’s rallying cry on the campaign trail and in the Oval Office has been “Make America Great Again.” From much-needed tax reform to lifting the regulatory burden off businesses to encouraging continued energy development, we are well on our way. Yet the president has thrown a huge obstacle into the mix that could blunt the positive impact of many of his accomplishments—his decision to impose tariffs and other restrictions on imported steel and aluminum under Section 232 of the Trade Expansion Act of 1962. While I have been a supporter of the Trump administration’s pro-growth policies and energy dominance agenda, imposing broad tariffs on steel risks unintended consequences that could jeopardize America’s resurgent oil and natural gas industry.
I am honored to serve as CEO of Canary LLC, one of the largest private oilfield service companies in the United States with operations in every major shale basin. We serve our customers and the public by providing quality drilling and production services. To do that, we – like the majority of the U.S. oil and natural gas industry – rely on imported steel at our Shawnee, Okla., manufacturing facility and across our operations, including drilling and production of our wellheads, pressure control equipment and specialty parts.
The proposed punitive tariffs would harm our business and slow or even reverse the expansion boom underway in America’s energy sector as steel and aluminum imports play a critical role. Drilling has picked up dramatically since the oil price crash of 2014, and output is at an all-time high. Canary and other oilfield service companies are finally starting to come back from a two-year downturn that drove many out of business. But our industry would absorb much of the increase in steel prices if tariffs are imposed. While oil prices have risen above $60 a barrel, service companies still struggle because of the belt-tightening measures our customers have put on rates.
At Canary, we use as much domestically-produced raw materials as possible, but in many cases, there’s not enough high-grade steel in the United States to meet demand. We spend more than $10 million a year directly or indirectly on imported steel; tariffs will add $2.5 million to our costs and result in us purchasing more finished products from abroad and doing less of manufacturing at our U.S. facilities. Higher costs for materials will also mean less revenue available to expand our activities and less money for wages and other employee benefits for our American workforce. While that may be music to the ears of the “Keep it in the Ground” crowd, it is counterproductive to the Trump administration’s policy of achieving energy dominance.
This gambit was tried once before and it failed spectacularly. Sixteen years ago, the Bush administration decided to levy tariffs on steel imports. Those tariffs were estimated to cause almost 200,000 job losses and cost around $4 billion in lost wages. Not surprisingly, the tariffs were withdrawn a year after their implementation.
As an entrepreneur, I support efforts to create American jobs, but protectionist policies like the proposed tariffs could end up doing more harm than good. Indeed, the president’s actions have already stirred up threats of retaliatory action by our trading partners. The European Commission, which coordinates trade policy for European Union members, has released a list of U.S. products it may subject to 25 percent duties if not granted an exemption from the tariffs. The list “ranges from rice to orange juice, make-up, motorcycles, motor boats and stainless sinks. It also includes many metals products for use in construction and industry.”
We can only continue down the path of energy dominance and robust economic growth by avoiding a damaging trade war, something that is likely inevitable should these tariffs go into effect. It is not too late for the president to reconsider his decision. America cannot truly be great again without open and free trade.
