US close to decision on steel, sparking fears of trade war

A worker at a steel warehouse in China's Liaoning province. Trump administration officials allege that China floods global markets with cheap steel, making it harder for US producers to compete.
A worker at a steel warehouse in China's Liaoning province. Trump administration officials allege that China floods global markets with cheap steel, making it harder for US producers to compete.PHOTO: REUTERS

Officials considering tariffs, quotas based on threat posed to national security by imports

WASHINGTON • The White House is on the cusp of a major decision about whether to impose new restrictions on steel imports, a choice that has divided President Donald Trump's administration while sparking global fears about a burgeoning trade war.

The US Commerce Department has for months been evaluating whether steel imports pose a threat to national security, and it is expected within days to present its finding and a recommendation.

Restrictions on steel imports would be Mr Trump's strongest move yet to fulfil his campaign promise to radically alter US trade policy - and would be a historic step forward for protectionism.

The National Economic Council has raised concerns about economic and diplomatic fallout from protectionist moves, and the Pentagon is concerned about how military allies might react.

Mr Trump, late last month, wrote in a Twitter post that he would take "major action if necessary" based on the Commerce Department's recommendations, suggesting he was open to following through on threats to try to revive the US steel manufacturing industry by imposing new trade restrictions.

If the Commerce Department does decide that imported steel poses a threat to national security, it will likely be based on the argument that the US needs a healthy steel industry to manufacture weapons and combat material.

The US imported about 30 per cent of the steel it used last year, up from 23 per cent in 2009, according to the Commerce Department.

Trump administration officials have argued that a spike in production by China has hammered the US steel industry. They allege that China floods global markets with cheap steel, making it harder for US producers to compete.

However, since the United States already imposes curbs on imports of Chinese steel, any new barriers are likely to have more of an effect on close American allies, such as Canada, South Korea, Mexico, Japan and Germany, according to Mr Chad Bown, a senior fellow at the Peterson Institute for International Economics.

Canada, for example, is the largest source of steel imports to the US, providing 17 per cent of all the steel it uses. Top Canadian officials are warning that tariffs or quotas could harm the economy in both countries.

Commerce Secretary Wilbur Ross has told Congress he is considering three different recommendations based on the national security reviews: new import tariffs, import quotas, or a combination of the two that would impose a tariff on steel imports over a certain threshold.

Mr Ross said this hybrid model would have a relatively minor impact on prices of US goods that use steel and aluminium "because... we are protecting something like the original status quo".

The steel industry says it is strongly in favour of import curbs.

But all three approaches being considered would likely raise the price of imported steel. In doing so, experts say, it would encourage domestic producers to raise their prices - in turn increasing the cost of other goods produced with steel.

Steel-consuming industries in the US say they pay more for steel than many of their competitors because of protections already in place, and that further price increases would cause them to lose even more ground.

WASHINGTON POST

A version of this article appeared in the print edition of The Straits Times on June 21, 2017, with the headline 'US close to decision on steel, sparking fears of trade war'. Print Edition | Subscribe