Deep Impact: How Will President Trump’s 25% Tariff on Steel Affect Liberia

Deep Impact: How Will President Trump’s 25% Tariff on Steel Affect Liberia

Monrovia – United States President Donald Trump sent the world into a frenzy last week when he announced that his administration will begin imposing additional 25% tariff on steel and a 10% tariff on imports of aluminum imported to the U.S.

Report by Rodney D. Sieh, This email address is being protected from spambots. You need JavaScript enabled to view it.


Industry observers are beginning to fear that the decision may negatively affect Liberia’s iron ore industry and probably lead to a decline in iron ore export and foreign exchange earning.

Thus, technicians at the Ministry of Finance and the Liberia Revenue Authority will need to immediately start assessing and quantifying the impact of this decision on Liberia’s fiscal projections.

Prior to the civil war, Liberia’s iron ore industry was one of the biggest in the world.

The country currently trades diamonds, agriculture products, iron, forest products and rubber in the world market.

The tariffs announced by Mr. Trump contain an initial exemption for Canada and Mexico, as the administration seeks broader trade concessions from both countries as it renegotiates the North American Free Trade Agreement.

Pres. Trump is opening the door to exemptions for other countries as well, saying he will consider exemptions for other allies that change their trade policies with the United States.

Arcelor Mittal, one of the world’s biggest steel giants which has an operation in Liberia, in a statement following Mr. Trump’s pronouncement, said it is "assessing the potential impact that the remedies announced may have on our operations and any implications for the global steel industry more widely."

In 2005, the company signed the first Mineral Development Agreement (MDA) to commence mining iron ore in the Yekepa and Buchanan. That agreement was then renegotiated and amended in 2006.

ArcelorMittal’s mining operations in Liberia are spread over four regions, with iron ore mined at Tokadeh in Nimba County. 

In 2014, the company shipped more than five million tons for the second year running, making it one of the largest iron ore exporters in West Africa.

But in a statement last week, Arcelor Mittal said: "The significant steelmaking overcapacity that has developed this century, and the rise in exports we have seen from several steel-producing nations, legitimizes governments worldwide taking a tough approach to addressing unfair trade practices.

We will continue to abide by the rules set by governments and regulators, and understand the desire of governments to support domestic industry.

The greater need, however, is to create a truly sustainable global steel industry, and the only way to do this is for steel-producing nations around the world to work together to address global overcapacity.

This is a long-term issue but there needs to be a clear focus on delivering significant structural change in our industry."

So, where does that leave Liberia?

Samuel P. Jackson, an Economist, expects a minimal impact. 

“Trump's imposition of tariff on steel and aluminum will have minimal or no impact on the Liberian economy in the short run unless retaliation by the EU, China and other countries result in a trade war.“

“A trade war will slow global economic growth and contribute to reduction in the demand and prices of iron ore and rubber.”

“Trump's move proves the hypocrisy of World Bank and IMF that have demanded free and open trade from developing countries.”

“Finally, Trump should be aware that trade wars and lax regulations triggered the Great Depression in the 1930’s.”

Both Finance and Economic Planning Minister Samuel Tweah and Foreign Minister Gbezhonga Findley declined to address the potential impact of the US President’s decision.

But a Washington, DC insider told FrontPageAfrica at the weekend that the world is venturing into unchartered territory with the imposition of tariffs on steel and aluminum by the Trump administration.

“This is a president who is willing to upend the established free trade order to gain leverage in cutting individual deals.

Exceptions have been made for our NAFTA partners, Canada and Mexico. Australia and Japan have approached Trump for the same.

The EU may take the U.S. to the WTO.

As such, the economic implications for the various actors, including Liberia, will depend on what happens next.

More exemptions by the U.S. President?

Retaliation by trading partners? And what will China do?”

In the US officials on both sides of the aisle while taking a wait-and-see approach are cautiously hopeful that any tariffs benefit U.S. local steelmakers and the overall American economy.  Utah Sen. Orrin Hatch, says history has demonstrated repeatedly that consumers ultimately bear the burden of tariffs.

Mr. Trump’s decision has already led to the resignation of his top economic adviser Gary Cohn who broke away with the President over his trade policy.

Gary Cohn, the Director of the National Economic Council, had been the leading internal opponent to Trump's planned tariffs on imports of steel and aluminum.

Last June, the Liberian government signed the first ever steel manufacturing agreement in the West African country in more than 169 years, heralding the end to the exportation of its rich unprocessed iron ores.

The $200 million agreement was signed between Tidfore Investment Company and the Liberian government that was represented by President Ellen Johnson Sirleaf, Finance and Lands and Mines ministers and other senior government officials.

The company had promised to produce 1000 jobs for Liberians and trumpeted as a major boost to the local economy.

Steel trade relations between Liberia and the U.S. dates back to the 1930’s when the administration of President Edwin Barclay controversially ended business with the Netherlands.

In a telegram dated December 3, 1937—7 p.m., Mr. Harry A. McBride, Special Representative of President Roosevelt in Liberia wrote suggesting that the Dutch lacked the financial resources to handle mining operations in Liberia.

McBride wrote: “After some difficulty I have been able to obtain in strict confidence from our representatives at The Hague the following definite information regarding Neep: “Careful inquiry indicates that Neep cannot itself finance Liberian project and that Netherlands capital cannot be induced to participate in exploiting so contrary to financial practice in this country particularly as no present interests exist here for mining properties.”

As far back as the 1930s, McBride argued: “You are aware that the Department has always felt that Liberian resources should be developed, in the best interest of the country, by outside capital representing a diversity of national interests, particularly those whose governments have no territorial ambitions in Africa.

However, the Department has also felt that the Liberian Government should avoid granting concessions even to friendly foreign interests unless it is convinced that they are not merely speculators or promoters and they possess sufficient capital and experience to work the concessions themselves.” Dr Fred P.M. Van Der Kraaij, a former official at the Ministry of Foreign Affairs in the Netherlands would later write on his blog Liberia History past and present:

“It may have been a coincidence but the following year the U.S. State Department suggested to grant the right to further geological explorations in the Bomi Hills area to U.S. Steel, a U.S. owned steel company.

The company sent a team to Liberia to investigate the possibilities, in 1938, but because of the absence of a harbor it gave up its rights.

It is interesting to note that a certain Edward Stettinius was Chairman of U.S. Steel in 1939.

The outbreak of the Second World War postponed further progress with respect to the exploitation of the Bomi Hills iron ore reserves.

When in 1943 President Barclay, accompanied by President-elect William Tubman, visited the U.S. the matter was raised again.

At the same time Barclay requested and obtained the services of a U.S. geological mission, which would survey Liberia’s iron ore reserves.”

At the time the U.S. search for a diversification of its supply of strategic materials brought American steel producers to Liberia where in 1944 William Tubman had taken over from Edwin Barclay. 

In 1945 a mining concession for the development of the rich Bomi Hills reserves was concluded with Lansdell K. Christie, a former U.S. Army officer who by sheer coincidence had become familiar with Liberia. 

Lansdell Christie had served with the U.S. Army in the construction of the airfield near Firestone’s Harbel plantations, Robertsfield, following the U.S. – Liberia Defense Treaty of March 1942.

Now, years later, after much criticisms over how past governments failed to make use of Liberia’s minerals and resources, many industry observers say the full impact of the US tariff of 25 percent on steel imports to the U.S., could in the long-term hamper Liberia’s economic progress.

As Mittal Steel indicated there is already overcapacity in the steel industry, meaning there are more steel in the world market than demand.

Second, Former President Sirleaf and President George Weah have blamed Liberia’s financial woes and declining economic situation on low prices for its iron ore.

Third, U.S. is a big consumer of steel and a key market for steel producers around the world.

A 25% tariff means a direct increase of costs on steel exporters. Industry observers fear that Steel producers could respond by passing on the cost to consumers of steel, passing the costs to suppliers of inputs such as iron ore, or by buying less iron ore.

In the current state of global overcapacity, increasing prices to the consumers is less likely.

Hence suppliers of iron ore, the main input for steel, are likely to feel the pinch of the 25% tariff.