Is Trump’s plan to revive US steel a pipe dream?

President Trump signed executive orders reviving the construction of two controversial oil pipelines last month.
President Trump signed executive orders reviving the construction of two controversial oil pipelines last month.

WASHINGTON — In his first few days on the job, President Trump had a lot to say about energy pipelines. He wanted them built and, true to his America First philosophy, he wanted them built with domestic steel.

“It’s going to put a lot of workers, a lot of steelworkers, back to work,” Trump declared from the Oval Office as he revived the Keystone XL and Dakota Access pipelines — reversing decisions made by Barack Obama. “You will see a level of quality that you’re not going to see when they bring pipe from far distances,” Trump told a GOP congressional retreat.

But scrutiny of Trump’s demand shows that his simple-sounding “Buy American” sloganeering runs headlong into actual economic conditions, legal barriers, and basic requirements of governing.


Industry analysts say the idea of forcing the Keystone and Dakota pipelines to be made from American steel is, well, a pipe dream. The Dakota pipeline is almost complete, so its developers don’t need to buy much, if any, additional pipe.

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As for Keystone, just drive a few miles east of Scranton in North Dakota, where hundreds of miles worth of 36-inch pipe — already purchased for the project — is stacked in a field and waiting for construction to begin.

Add to that the fact that few American steelmakers make the type of steel required for the pipeline.

All told, it looks as if Trump’s pipeline declaration is another example of facts and details getting in the way of the president’s original wishes — like finding a quick fix for the Affordable Care Act.

The appeal of mandating American steel for pipelines is obvious to a president whose protectionism seems like a throwback to another era. It’s also in keeping with campaign promises to revive manufacturing in states such as Pennsylvania and Ohio, whose blue-collar voters sent him to the White House.


And at least one US company is still excited about the opportunity to supply pipe for the 875-mile Keystone project, which would bring tar sands oil from Canada to Nebraska, and eventually the Gulf Coast.

Nucor Corp.’s chief executive told investors on a recent earnings call that TransCanada, Keystone’s developer, might be required to repurchase miles of pipes because much of the prebought product wouldn’t fit a new “Buy American’’ requirement.

Piping that was slated to be used for the Keystone XL pipe line in 2012.
Piping that was slated to be used for the Keystone XL pipeline in 2012.

“If they need it, we’re here to supply it,” said John J. Ferriola, chief executive of the Charlotte, N.C.-based company. “When they say about having to use made, melted, and rolled in the United States in the Keystone, we don’t know if that would then disqualify the pipe that’s already on the ground that was not melted and rolled in the United States.”

Ferriola added: “If I get to vote on that, you know how I’m going to vote.”

Ferriola doesn’t have a vote, but his predecessor, former Nucor chief executive Dan DiMicco, said he had input on the policy when he was advising Trump during the transition.


DiMicco, who stepped aside from Nucor in 2013, served in the Trump campaign as senior adviser, was a key player on trade issues in the Trump transition, and was shortlisted to be the US trade representative.

Even DiMicco acknowledges that the Department of Commerce may have difficulty forcing the Keystone and Dakota pipelines to buy American steel.

“What it means is probably more for future pipeline work than the current ones,” DiMicco said, acknowledging that the current projects have already bought a lot of steel. “More importantly this is something going forward that is going to influence pipeline projects and infrastructure projects for the next four to eight years. There are a lot of pipelines that need to be built.”

But some analysts aren’t buying it.

“This is not the panacea for steel demand,” said Gordon Johnson, a steel industry analyst with Axiom Capital Management. “People are saying that it is. But it’s really quite the opposite. . . . Analysts who have touted this as a positive for steel are cheerleading.”

He noted that few American steelmakers make the type of steel required for the pipeline, and there is skepticism they will retool their plants to make it in part because margins are low. American companies, he said, tend to focus on steel for appliances and automobiles.

“Somebody at the White House doesn’t have a clue,” said Charles Bradford, the president of Bradford Research Inc. “This is not a common type of steel. It’s a very high strength steel which very few people make.”

Trump’s supporters, including DiMicco, say that companies will start producing steel if Trump’s edict creates the demand.

“That won’t be an issue,” DiMicco said.

Trump’s directive to the Commerce Department is to come up with a plan for “all new pipelines” to be manufactured with American steel “to the extent permitted by law.” The department has six months to come up with a plan.

White House spokesman Sean Spicer, when describing the president’s actions, said Trump directed the “Commerce secretary to lead a study looking into building the Keystone and Dakota Access pipelines, as well as any other future pipeline, with US-made steel and pipe and accessories.”

A section of the Dakota Access Pipeline under construction in North Dakota last September.
Tom Stromme/The Bismarck Tribune/AP/File
A section of the Dakota Access Pipeline under construction in North Dakota last September.

International trade rules and other legal barriers pose another problem, especially on a privately financed project like Keystone.

“If a project is purely privately funded, I think you’d have a harder time applying Buy America requirements,” said Christopher Weld, an international trade attorney.

He pointed to America’s trade obligations under the World Trade Organization’s Government Procurement Agreement, which bans members from granting preferred treatment to domestic companies. There are exemptions to that rule, for transportation and highway projects.

Nevertheless, Trump is hardly the first elected leader to try to revive America’s steel industry.

For four decades it’s been a bedrock part of political stump speeches by candidates from both parties throughout the industrial Midwest. America is now the world’s largest importer of steel, maddening to workers who’ve been laid off from factories around the country.

Trump also is not the only politician to try to force TransCanada to buy American steel for its pipeline: Senator Al Franken of Minnesota attempted to include a Buy America clause via an amendment to pipeline legislation in 2015.

It was blocked by Republicans.

Trump is intimately familiar with steel from his previous career as a construction baron. The Trump Organization purchased Chinese steel and aluminum for at least two of his recent construction projects, according to a Newsweek investigation that was published during the presidential campaign.

The projects included the Trump International Hotel Las Vegas and Trump International Hotel and Tower in Chicago.

Even the steel industry association, which is supportive of Trump, acknowledges that the pipelines order alone isn’t going to be a massive boon for American steel.

“What it shows is a positive approach to energy and it shows a way to get the markets excited,” said Philip K. Bell, the president of the Washington, D.C.-based Steel Manufacturers Association. “If you look at the reaction to the statement you’d think that oil is coming out of the ground.”

He interprets Trump’s talk about using American steel for the pipelines in the broadest possible way.

“It could be setting the stage for other infrastructure plans,” he said. “The administration is making clear that those projects need to made in America. This isn’t really a conversation about Keystone steel.”

Annie Linskey can be reached at Follow her on Twitter @annielinskey.