US President Donald Trump launched a trade probe against China and other exporters of cheap steel, raising the possibility of new tariffs, Reuters reports.
Citing concerns about national security, Trump made the announcement on Thursday at a White House ceremony with US steel executives from Nucor Corp., United States Steel Corp. and TimkenSteel Corp.
Also attending the ceremony was 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,” Trump was quoted as saying. “This is not an area where we can afford to become dependent on foreign countries.”
Trump won many votes in industrial states like Michigan and Pennsylvania with a pledge to boost manufacturing and crack down on Chinese trade practices.
China is the largest national producer and makes far more steel than it consumes, selling the excess output overseas, often undercutting domestic producers, Reuters said.
The unusual step of launching an investigation comes as Trump is pressuring China to do more to rein in an increasingly belligerent North Korea.
When Chinese President Xi Jinping visited Trump in Florida earlier this month, Trump raised the possibility of using trade as a lever to coax China to do more.
“Everything they export is dumping,” said Derek Scissors, Asia economist at the American Enterprise Institute, a Washington think tank.
Ross cast the decision to initiate the probe as a response to Chinese exports of steel into the United States reaching the point where they now account for 26 percent of the US market.
Chinese 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 Commerce inquiry finds the US steel industry is suffering from too much steel imports, he will recommend retaliatory steps that could include tariffs.
Diverging from the Obama administration’s approach to the issue, which relied largely on filing complaints to the World Trade Organization (WTO), Trump 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.
In October 2001, a Commerce Department investigation found “no probative evidence” that imports of iron ore and semi-finished steel threaten to impair US national security.
On Thursday shares of steel makers closed between 4 percent and 8.5 percent higher.
The US has nearly 100 plants that make millions of tons of steel annually. The US government has attempted to shield them from cheap foreign steel chiefly through the WTO, but the Trump administration said this has had little impact.
“The artificially low prices caused by excess capacity and unfairly traded imports suppress profits in the American steel industry,” the administration said in a statement.
But experts were skeptical about the administration’s argument that cheap Chinese steel threatened US national security.
The Defense Department’s annual steel requirements comprise less than 0.3 percent of the industry’s output by weight.
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