The US Commerce Department on Friday recommended imposing heavy tariffs on China, Russia and other countries to counter a global glut in steel and aluminium which it says threatens national security.
The move gives president Donald Trump the opportunity to strike a highly public blow for his “America first” trade policy, but raises the prospect of retaliation from countries targeted and was sure to stoke fears of a trade war.
In two reports submitted to the president last month and made public on Friday, Commerce Secretary Wilbur Ross laid out an array of possible options, including a tariff of at least 24 per cent on all steel imports worldwide, and a similar tariff on aluminium imports from China, Russia and three other countries.
Other options would impose either high tariffs or quotas on steel and aluminium imports.
Ross told reporters the principal question was whether cheap imports impaired US national security by making domestic production unviable.
“I have determined that they do,” he said.
Ross said typical US trade actions against dumping and illegitimate subsidies had failed to address market oversupply, particularly by China, because “Serial offenders can evade these orders by transhipment through another country, with or without additional processing.”
Trump has until mid-April to decide what remedies to impose, if any, and Ross acknowledged that any US action is likely to be challenged by exporting nations in the World Trade Organisation, Ross said.
The recommended steel and aluminium sanctions address long-standing concerns about Chinese overproduction, but take the extraordinary tack of framing them in terms of national security and defence.
The administration of former president Barack Obama also sought to tackle the subject but emphasised trade talks with China rather than punitive measures.
And these proposals could hurt other countries more than China, which is the world’s largest steel producer but provides less than one per cent of US imports and sells only 10 per cent of its wrought aluminium abroad.
Jacking up steel prices?
The report found 10 US steel furnaces have closed since 2000, causing a 35 per cent drop in employment, while global excess steel capacity is seven times greater than US demand, largely due to China.
And since 2013, six aluminium smelters have been shuttered as well, with only two of the remaining five operating at capacity.
For steel, Ross recommended three possible options: a 24 per cent tariff on all steel from all countries; a 53 per cent tariff on imports from 12 countries, including China, Russia and Brazil; or a quota on steel from all countries.
For aluminium, he recommended either a 7.7 per cent tariff on the metal from all countries; a quota for all countries; or 23.6 per cent tariffs on imports of aluminium from China, Russia, Hong Kong, Vietnam and Venezuela.
US industries have urged the administration to exercise care since high import tariffs would raise the cost of supplies. But Commerce said the goal of the measures was to boost domestic aluminium and steel production.
Gary Clyde Hufbauer, a noted trade expert at the Peterson Institute for International Economics, said the steel report failed to address the costs to the US economy of higher steel prices which could rise by as much as 20 per cent as a result of the trade sanctions.
“GE, Caterpillar, Emerson, anybody who builds a bridge, they’re all going to pay more money,” Hufbauer told AFP, noting the proposals come as the White House is trying to spur a major renewal of US infrastructure.
“There’s no talk about that burden,” he added. “You’re going to have high-cost steel in this country relative to other countries.”
Hufbauer also said the Commerce Department used a broad definition of “national security” that included industries and products not traditionally considered crucial to defence, in order to justify the need for such steep tariffs on steel.
“You’re politically committed to the steel industry but you’re doing it under colour of national security and that’s what I consider a hoax, really.”