US eyes heavy tariffs on China, Russia to counter steel, aluminum glut
By Douglas Gillison
The US Commerce Department on Friday recommended imposing heavy tariffs on China, Russia and other countries to counter a global glut in steel and aluminum 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 percent on all steel imports worldwide, and a similar tariff on aluminum imports from China, Russia and three other countries.
Other options would impose either high tariffs or quotas on steel and aluminum 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 transshipment 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 Organization, Ross said.
The recommended steel and aluminum sanctions address long-standing concerns about Chinese overproduction, but take the extraordinary tack of framing them in terms of national security and defense.
The administration of former President Barack Obama also sought to tackle the subject but emphasized 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 percent of US imports and sells only 10 percent of its wrought aluminum abroad.
– Jacking up steel prices? –
The report found 10 US steel furnaces have closed since 2000, causing a 35 percent drop in employment, while global excess steel capacity is seven times greater than US demand, largely due to China.
And since 2013, six aluminum 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 percent tariff on all steel from all countries; a 53 percent tariff on imports from 12 countries, including China, Russia and Brazil; or a quota on steel from all countries.
For aluminum, he recommended either a 7.7 percent tariff on the metal from all countries; a quota for all countries; or 23.6 percent tariffs on imports of aluminum 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 aluminum 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 percent 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 an broad definition of “national security” that included industries and products not traditionally considered crucial to defense, 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 color of national security and that’s what I consider a hoax, really.”