In the steel company’s Canton, Ohio, facilities, only two people work per shift. The rest of the company, which manufactures and markets bearings and other accessories in 28 countries around the globe, is fully automated. Timken — the chief executive officer, president and chairman — said his company will make efforts to grow its business with the excess funds made from the tariffs.
“Even though there is a high level of automation [at present], it’s important to recognize that you have to lean out your entire organization, you have to be as organized as possible, in order to compete in a global market that is awash with excess capacity,” Timken told CNBC on “Power Lunch” on Monday.
That overcapacity includes China, which has been flooding the global market with a steel production10 times that of the U.S.
Timken said the tariffs — 25 percent on steel and 10 percent on aluminum — will help correct the overcapacity issues.
“We spend a lot of time talking about China and their 400,000 tons,” Timken said. “But you also have to recognize there are another 300,000 tons in the rest of the world that are targeting a market that is only 94 million tons.”
While increased prices from tariffs could lead to companies using different products, or buying ready-made products directly, Timken said he’s not too concerned.
“We know that if we’re given a level playing field, we can go toe-to-toe with anybody in the world,” he said. “What I can’t do is compete with foreign governments. That is what we’ve been doing over the last couple of years.”
Over time, the tariffs are a growth strategy for the U.S. economy, said Alan Tonelson, founder of the economic blog RealityChek.
“There is no free market in China, and China sets the global price,” Tonelson told CNBC on “Closing Bell.”
“Unless you think that the United States can keep on, can grow healthfully at all, with a steadily increasing presence of China government subsidized products in its own market,” Tonelson said. “If you value free markets … that’s the last thing you should want to see. And it can’t possibly make for healthy growth over the long term.”
But, Steve Fisher, chief executive officer and president of Novelis, an Atlanta-based industrial aluminum company, said it’s a bad idea to impose a blanket tariff over all countries.
“A tariff that is arbitrarily put on all countries, instead of targeting where the issue is — the … subsidized overcapacity in China — is not really effective,” he told CNBC on “Power Lunch.” “It disproportionately affects our good supply chain, … other countries that are actually acting in a rational manner.”
The United States is the world’s biggest importer of steel, according to the U.S. Commerce Department. Despite China’s advantage, 16 percent of U.S. steel imports came from Canada in 2017, the largest of any country. In addition, between 2013 and 2016, 56 percent of U.S. aluminum imports came from Canada.
Fisher recommended carving special rules for countries such as Canada that are large suppliers of both steel and aluminum for the U.S.
Timken, however, said applying special rules for individual countries will undermine the effectiveness of the tariffs.
“We’ve been supportive of the president pursuing an across-the-board treatment [of the tariffs],” Timken said. “Once you start opening things up, it’s a slippery slope, as [Commerce] Secretary [Wilbur] Ross said the other day.”