Trump gets recommendation for steep curbs on imported steel, risking trade war

The Commerce Department is recommending hefty tariffs or quotas severely restricting imported steel and aluminum, which if imposed would almost certainly lead to an international trade war.

Commerce Secretary Wilbur Ross told reporters on Friday that his department’s investigations found that imported steel is a threat to national security and recommended at least a 24 percent tariff on all steel imports from around the world under a trade law called Section 232.

The report highlights a number of options for President Trump, who could also decide to not take any action.

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If Trump decides to severely restrict imports, the move would almost certainly lead to retaliation against U.S. exports around the world, as well as litigation at the World Trade Organization.

It would be the biggest example yet of the White House flexing its muscles on trade, which Trump promised during his presidential campaign on behalf of U.S. workers and manufacturers.

But lawmakers and trade advocates have warned Trump that imposing a slew of high tariffs would risk the U.S. economy’s growth.

A number of groups quickly criticized Friday’s report.

The Can Manufacturers Institute (CMI) expressed disappointment with the recommendations saying that even a small tariff would create uncertainty about prices, supply and financing and would dramatically curtail investment and hiring in the United States.

“Tariff or trade restrictions will have severe economic impact on the can manufacturing industry and its employees,” said CMI President Robert Budway. “This recommendation could have a ripple across the supply chain.”

If the president moves forward with the recommendation, CMI said it plans to file a petition with Commerce asking for administrative relief from tariffs on imports of certain products such as aluminum can sheets.

Roy Hardy, president of the Precision Metalforming Association, and Dave Tilstone, president of the National Tooling and Machining Association, said imposing the steel tariffs “would devastate downstream U.S. steel consuming manufacturers who employ 6.5 million Americans.” 

The American Wire Producers Association (AWPA) in a letter to Trump on behalf of 15 U.S. manufacturers and organizations that include Hardy’s and Tilstone’s groups, concluded that new tariffs are not only a threat to American jobs but also to U.S. national security.

“The simple fact is that more workers, consumers, industries and companies would suffer, due to increased prices, than would benefit from imposing new tariffs on steel and aluminum,” the letter said.

Bryan Riley, director of National Taxpayer Union’s Free Trade Initiative, questioned the definition of “national security” used in the report and urged Trump to reject the recommendations. He said the tariffs would increase the cost of supplying U.S. troops, make it harder for manufacturers to compete with China and increase prices for consumers.

Commerce Secretary Ross on Friday defended the use of the national security trade law and didn’t express concern about possible trade retaliation, although he said he wouldn’t be surprised by a WTO challenge. 

“We believe this a perfectly valid interpretation of national security the way that it’s used in section 232, which is much broader than you might think,” he told reporters.

 

Trump not only faces a possible global backlash if he follows through with the recommendations but within his own party. Republican lawmakers have extreme caution on the rarely used national security trade law.

“I would just urge us to go very, very cautiously here, especially with section 232,” Sen. Pat Toomey (R-Pa.) said during a White House trade meeting on Tuesday. 

“232 is a different matter, and invoking national security, when I think it’s really hard to make that case, invites retaliation that will be problematic for us.”

Trump pushed back on Toomey, arguing that countries dumping their steel into the United States would accept the tariffs “to keep [their] people working.”

Most of the lawmakers at the meeting called for a targeted approach to avoid hitting U.S. allies.

“We’ve got allies with us against China’s unfair trade practices,” said House Ways and Means Committee Chairman Kevin Brady (R-Texas). “We have to be careful, as you look at these decisions, to target it, to make sure our allies are with us as we do this.”

But the recommendations won praise on Friday from several Senate Democrats, who called on Trump to take swift action. 

Senate Minority Leader Charles Schumer (D-N.Y.) said “the Commerce Department’s recommendations today we hope are the beginning of efforts by this administration to finally get tough on China and help level the playing field for American steel and aluminum producers and workers.” 

“Now the president must quickly follow through with his promise to stand up for these workers and American manufacturing by adopting the full extent of these recommendations,” Schumer added. 

Sen. Sherrod Brown (D-Ohio) called for “swift and tough action that provides real, long-lasting relief for our steel industry, which is facing an onslaught of imports as we wait for a decision.” 

The aim of each of the recommended remedies is to increase domestic steel production from current 73 percent capacity to approximately 80 percent. With aluminum, the plan would be to raise production capacity from 48 percent to 80 percent, the report said. 

Ross said that would translate to about a 10 percent increase in steel employment, but could be higher because of growth in connected industries. He noted that the economy also is running near full employment so finding workers may prove challenging. 

The president is required to make a decision on the steel recommendations by April 11 and on the aluminum recommendations by April 19.

Section 232 of a 1962 trade law gives the president the power to apply higher tariffs and quotas on imported steel and aluminum for national security reasons.

The United States already has more than 160 countervailing and antidumping duties on steel imports — some as high as 266 percent — against 37 countries and 25 categories of basic steel products. There are 28 tariffs against China along with several pending investigations, which some groups say is enough to support U.S. industries. 

Ross said that outside of the 90-day deadline he didn’t know when the president would make his final decisions.

He also didn’t know how long the tariffs or quotas would last if imposed, but noted that former President George W. Bush had emergency steel tariffs in place for a year. 

Bush ended those tariffs, which led to higher steel prices and cost jobs, after U.S. allies threatened to retaliate. 

The report from the Commerce department includes the 24 percent tariff on all steel imports as one of three options for Trump.

Under the second option, Trump could levy a 53 percent tariff on all steel imports from 12 countries — Brazil, China, Costa Rica, Egypt, India, Malaysia, South Korea, Russia, South Africa, Thailand, Turkey and Vietnam. This option could also include a quota limiting steel imports from all other countries that would be equal to 100 percent of their 2017 exports to the United States. 

The third option doesn’t include tariffs, but would impose a quota on steel products from all countries equal to 63 percent of each country’s 2017 imports into the United States.

The domestic steel industry cheered the recommendations.

Todd Leebow, president and CEO of Majestic Steel USA, a Cleveland, Ohio-based steel service center and master distributor of steel, said the report’s “findings reveal the massive cheating which has negatively impacted our domestic steel industry over the past number of years.” 

“I believe President Trump is going to take these strong recommendations from the Department of Commerce and make a clear and direct decision to level the playing field for the US steel industry and the tens of thousands of American jobs that hang in the balance,” Leebow said. 

On aluminum, the report recommends a tariff of at least 7.7 percent on all aluminum exports from all countries. 

As an option, it says the administration could impose a tariff of 23.6 percent on all products from China, Hong Kong, Russia, Venezuela and Vietnam. All the other countries would be subject to quotas equal to 100 percent of their 2017 exports to the United States. 

The third option is a quota on imports from all countries equal to a maximum of 86.7 percent of their exports to the United States last year.

Alliance for American Manufacturing (AAM) President Scott Paul, said that the reports show that “Trump is one step away from taking historic action to defend American jobs and security.”

“We believe the action must be broad, robust and comprehensive, and the Commerce Department report makes a compelling case for immediate action,” Paul said. 

This story was updated at 3:41 p.m.