Abbott to Trump: Steel and aluminum tariffs will harm Texas oil and gas

By Matthew Choi

Gov. Greg Abbott urged President Donald Trump in a letter Thursday to reconsider his tariffs on foreign steel and aluminum, arguing the imported metals are vital to the growth of Texas' economy.

In the letter, Abbott praised his fellow Republican for guiding the country to a time of increased job creation and thriving agriculture, technology and energy sectors by "modernizing our nation's trade policies" to work in the United States' favor. But Abbott also emphasized the necessity of foreign steel and aluminum to the continued growth of American oil and gas, which have an enormous footprint on Texas.

"Our country's steel and aluminum workers are a vital part of the national workforce, and creating jobs in that industry must be a top priority," said the letter. "But attempting to protect these jobs through the new tariffs could jeopardize the livelihoods of hundreds of thousands of Texans and other Americans employed in the oil and gas industry."

Trump announced the steel and aluminum tariffs earlier this year, targeting some of the United States' closest allies such as the European Union, Canada and Mexico. The tariffs are designed to boost the domestic steel and aluminum industries. But critics have expressed worry about trade wars and other ripple effects. 

The president has also repeatedly argued against free trade agreements like the North American Free Trade Agreement, which he says unfairly benefits the United States' partners at its expense. 

Abbott, a vocal supporter of Trump, has also spoken in the past about NAFTA's necessity in advancing the economy of Texas. The state's trade with Mexico surpassed $187 billion in 2017. Abbott wrote a letter on April 4 to a top administration official arguing that elements of NAFTA were vital to Texas.

The state accounted for more than $8.3 billion in steel and aluminum imports in 2017, more than twice any other state, according to the letter. Abbott said increasing the costs of imported steel and aluminum would hinder the U.S. oil and gas industry from surpassing its competitors and that Texas oil and gas account for more than twice as many jobs as the national steel and aluminum industry.

Protecting steel and aluminum jobs has been a large talking point for Trump since he first announced his candidacy. 

"Our Steel and Aluminum industries (and many others) have been decimated by decades of unfair trade and bad policy with countries from around the world," Trump tweeted in March. "We must not let our country, companies and workers be taken advantage of any longer. We want free, fair and SMART TRADE!"

Abbott's leader reads in full: 

Dear Mr. President:

Thank you for your leadership in updating and modernizing our nation’s trade policies to ensure
that they work for today’s American economy. These efforts, coupled with your
administration’s tax cuts and regulatory reforms, make this an exceptional time for American
businesses and mark the beginning of a new era of economic prosperity for the United States.
Texas is committed to leading the way in bolstering American industries and protecting
American jobs. Our oil and gas, agriculture, and technology sectors are thriving and our job
creation rates are soaring, but I am concerned that the new tariffs on steel and aluminum imports
and other goods may threaten future economic growth both in our state and across the country. I
urge you to reconsider these tariffs in light of the unintended negative consequences for
American industries.

According to U.S. Census data, Texas accounted for more than $8.3 billion in steel and
aluminum imports last year, which is more than double any other state. These steel and
aluminum imports are crucial for the construction and maintenance of drilling wells, pipelines,
and other infrastructure that are the backbone of our oil and gas industry. The construction of
significant portions of this infrastructure depends on certain types of steel for which there is no
U.S. manufacturer, and industry experts estimate that the new tariffs will dramatically increase
the costs of completing wells in shale formations and building more LNG production lines.
We are extremely fortunate to be on the cusp of a second U.S. shale boom that has added jobs in
oil fields across Texas and the United States. U.S. crude output reached nearly 10.5 million
barrels a day in May, and the United States is poised to surpass Russia as the world’s largest
producer by the end of the year. And by 2023, a recent report by IHS Markit projects that Texas’
Permian Basin has the capacity to produce more crude oil than any other country in the world
except Russia and Saudi Arabia. But in order for the Permian Basin to reach its full potential,
substantial infrastructure investment is necessary. If the new tariffs continue to drive up the cost of oil and gas production, America’s quest for global energy dominance could be significantly
hindered.

According to U.S. Bureau of Labor Statistics data, nearly half a million Texans work in
industries that use steel or aluminum, but only around 7,600 are directly employed in the
production of the metals. Texas alone has 225,000 jobs in oil and gas exploration, production,
and services, which is nearly twice as many as the 140,000 jobs nationally in steel and aluminum
production that the new tariffs are intended to safeguard. Economists estimate that the U.S. can
expect to lose between one and 1.5 oil and gas jobs for every steel or aluminum job saved by the
new tariffs. Our country’s steel and aluminum workers are a vital part of the national workforce
and creating jobs in that industry must be a top priority, but attempting to protect these jobs
through the new tariffs could jeopardize the livelihoods of hundreds of thousands of Texans and
other Americans employed in the oil and gas industry.

In addition to the new tariffs on steel and aluminum imports, the tariffs set to go into effect on
roughly $50 billion worth of foreign goods beginning this summer and China’s retaliatory tariffs
also threaten the economies of Texas and other states particularly dependent on international
trade with China. In 2017, Texas exported more than $8 billion worth of tariff-eligible goods to
China, the most of any state. About $1 billion of this was agricultural products, including 46
percent of all U.S. cotton exported to China, 25 percent of exported sorghum, 13.2 percent of
exported beef and veal, and 3.3 percent of exported wheat. If 25 percent tariffs are, in fact,
levied on these agricultural products, Texas farmers will be significantly affected. U.S.
chipmakers will also be affected by the new tariffs. Many semiconductors imported into the
United States are actually manufactured in the United States then exported to China for
assembly, testing, and packaging. Thus, U.S. chipmakers will end up paying tariffs on the reimportation
of their chips if the planned tariffs on Chinese semiconductors go into effect.

Once again, I highly commend your commitment to curbing unfair trade practices and putting
American businesses and workers first. As your administration continues to champion these
businesses and workers, please consider the negative impact that the new tariffs on steel and
aluminum imports and other goods will have on the economy of Texas and the nation as a whole.

Sincerely,

Greg Abbott

© 2018 The Texas Tribune