The Trump administration has taken China to task for its strategy of dumping cheap imports, in this case steel, into other countries as a policy.
Citing national security concerns, U.S. President Donald Trump has launched a probe against exporters of cheap steel in the U.S. market thus raising the possibility of new tariffs which have sent the shares of some U.S. steel companies soaring by more than 8%.
Trump made the announcement at a White House ceremony with U.S. steel executives from United States Steel Corp, Nucor Corp and TimkenSteel Corp alongside Commerce Secretary Wilbur Ross, a billionaire businessman who made part of his fortune investing in the steel business.
“Steel is critical to both our economy and our military,” said Trump. “This is not an area where we can afford to become dependent on foreign countries.”
Trump has won a significant number of votes in industrial states including Pennsylvania and Michigan. He had pledged to boost manufacturing jobs and crack down on Chinese trade practices.
China is the world’s second largest producer of steel. It makes far more than it consumes and dumps the excess quantity overseas, often undercutting domestic producers.
The step underscores the fact that Trump isn’t scared to use trade as a lever against China to do more and not be belligerent against North Korea.
“Everything they export is dumping,” said Derek Scissors, an Asia-focused economist at the American Enterprise Institute, a Washington-based think tank.
It was Ross who cast the decision to initiate the probe against China as a response to their dumping strategy, which has reached a point where Chinese steel now accounts for 26% of the U.S. market.
Their exports have risen “despite repeated Chinese claims that they were going to reduce their steel capacity,” said Ross, whom The Economist, a business magazine that champions free trade, in 2004 labeled “Mr. Protectionism” for his history of owning businesses protected from foreign competition.
Ross said if the outcome of the inquiry finds that the U.S. steel industry is suffering from excessive steel imports, he will recommend steps, which could include a hike in import tariffs.
The Trump administration’s approach is varying from the Obama administration’s which had largely relied on filing complaints to the World Trade Organization. In Contrast, Trump has ordered a probe under Section 232 of the Trade Expansion Act of 1962, which lets the president impose restrictions on imports for reasons of national security.
While the U.S has almost 100 plants that make millions of tons of steel annually, earlier attempts by the government to shield them from cheap foreign imports through the WTO has had little impact, said the Trump administration.
“The artificially low prices caused by excess capacity and unfairly traded imports suppress profits in the American steel industry,” said the administration in a statement.
“There is no doubt that steel plays a role in our national security and the manufacturing of U.S. weapons systems,” said Jeff Bialos, a partner at law firm Eversheds Sutherland, who has worked on steel trade cases in the past.
Some of the nation’s biggest steel consumers are U.S. Navy shipbuilders Huntington Ingalls Industries Inc and Lockheed Martin Corp.