Navigating the New Administration’s Impact on Manufacturing and Trade

Trade

On March 31, President Trump signed a pair of executive orders aimed at cracking down on trade abuses. The first calls for the completion, by the Secretary of Commerce and the United States Trade Representative, of a Report on Significant Trade Deficits to assess the major causes and effects of the trade deficit, which stood at $502.3 billion in 2016. The second order of March 31 dealt with collection and enforcement of anti-dumping and countervailing duties and violations of trade and customs laws.

While economists concede the current trade situation is not completely advantageous for the U.S., they also argue that many of the job losses blamed by Trump on trade are in fact due to automation. It is argued that 80 to 90% of the manufacturing jobs lost since 1977 have been caused by productivity gains, not trade deals or foreign labor. Another reason for the increased deficit in 2016 is the high American dollar, which makes American-made goods more expensive overseas.

The executive orders gave 90 days from March 31 for reports to be filed on the trade situation; it remains to be seen if “violations of trade and customs laws” will be determined to contribute to the U.S. deficit. Beyond that lies the question of what actions the executive or legislative branches can take to alleviate perceived flaws without instigating a trade war.

In his joint address to congress on Feb. 28, 2017, President Trump reiterated his administration’s focus to “Buy American.” Exactly what this means is unknown now, but companies bidding to do business with the U.S. government, especially with respect to infrastructure projects, are advised to closely monitor any changes to requirements for certification of compliance with domestic content law and regulations. According to VMA legal counsel David Harquist, any proposed strengthening of Buy American laws could precipitate a major battle on the hill since many U.S. industries are similar to VMA companies in that they are dependent on foreign sourcing to be competitive.

Infrastructure

In March, U.S. Transportation Secretary Elaine Chao said the Trump Administration would unveil a $1 trillion infrastructure plan later in 2017. She indicated it will cover transportation, energy and water. Chao said the administration plans to offer incentives for public-private partnerships, but no details for funding the projects has been offered.

There is no indication of what, if how much, of the spending plan could be allocated to the much-needed water infrastructure improvements noted by Thomas Decker, also at the 2017 Leadership Forum.

Environment

Another executive order reverses the Clean Power Plan, which required states to regulate power plants. The Clean Power Plan was never implemented because it was held up in court, but a White House official told the press that Trump felt the order was necessary to ensure American energy independence and jobs.

President Trump has also prioritized promoting domestic energy production, and on March 28 signed an executive order “Promoting Energy Independence and Economic Growth” in which he ordered executive departments and agencies to immediately review “existing regulations that potentially burden the development or use of domestically produced energy resources and appropriately suspend, revise, or rescind those that unduly burden the development of domestic energy resources beyond the degree necessary to protect the public interest or otherwise comply with the law.”

In response, Ryan Zinke, Secretary of the Interior, has already signed two secretarial orders, the first of which overturns the 2016 moratorium on all new coal leases on federal land. The second implements a review of agency actions directed by the president’s executive order to promote energy independence. Secretarial Order 3349 directs a re-examination of the mitigation and climate change policies across the Department of the Interior “in order to better balance conservation strategies and policies with the equally legitimate need of creating jobs for hardworking American families.” This order specifically sets a timetable for review of agency actions that may hamper energy development and reconsideration of regulations related to U.S. oil and natural gas development.

Additionally, despite the administration’s promise to “bring back coal,” it is highly unlikely this will happen. The abundance of cleaner, cheaper, U.S.-produced natural gas is much more important to the decline of coal than federal regulations. The cost of renewables has also been declining rapidly, so many utilities are integrating solar and wind power generation into their portfolios. In 2016, new solar power plants were built totalling 9.5 GW of generating capacity. In this same year, 8.2 GW of wind power came online and 8 GW of natural gas power plants were built. The Energy Information Administration projects that 36.6 GW of natural gas-fired generation will be added in the next two years.

In support of natural gas production, the Trump Administration has promised to roll back environmental regulations, including the pending Interior Department rule controlling the flaring, venting and unintended leaking of methane gas on federally owned or Native American lands, and the EPA’s recently adopted regulations requiring reductions in methane gas leaks in the oil and gas industry.

What does this mean for the valve industry? The ramifications are yet unknown, because, despite federal regulations being lowered, end users and standards organizations still have an impact on how valves are specified and built. Whether these lowered regulations will lead to more natural gas production is also unknown, as production levels are governed by price and demand from the market.

One thing seems certain: Siting and constructing natural gas pipelines can be expected to get easier, as the Federal Energy Regulatory Commission will be pressured to quickly approve pipelines associated with shale gas development in the Marcellus and Utica shale regions.

The EPA

The Trump Administration has been aggressively touting its deregulatory approach and a process has been created for stakeholders affected by regulations to reach out to the U.S. Environmental Protection Agency (EPA).

Administrator Pruitt recently sent a memo to his senior staff that provides a road map for implementing Executive Order 13777, which directs agencies to take steps to repeal, replace or modify unduly burdensome regulations. To identify the regulations EPA will prioritize, Pruitt created a Regulatory Review Task Force that has been directed to develop the recommendations by seeking input from regulated entities and the trade associations representing the regulated community. The memo further directs the task force to conduct “some general outreach” and to host public stakeholder meetings and to screen and compile the responses by May 15, 2017. To learn more about ways of contributing input to these discussions, visit the EPA website.

Kate Kunkel is senior editor of VALVE Magazine.