On Friday, Commerce Secretary Wilbur Ross said that the steel and aluminum industries in the U.S. are being threatened by imports that could “impair our national security,” citing the fact that only one company in the U.S. now produces a high-quality aluminum alloy needed for military aircraft.
The agency’s recommendations in the “Section 232” national security reviews of the two industries are in response to a probe authorized by President Trump under a 1962 trade law that has not been invoked since 2001. The president has until mid-April to make a final decision, reports Reuters.
President has three options
The intended purpose of the measures is to raise steel and aluminum to 80 percent of industrial capacity. Currently, steel plants are running at 73 percent of capacity and aluminum plants at 48 percent. Ross is offering three options to the president:
1. Trump can impose tariffs of 24 percent on all steel and 7.7 percent on aluminum imports from all countries.
2. Or Trump can impose tariffs of 53 percent on steel imports from 12 countries, including Brazil, China and Russia, and tariffs of 23.6 percent on aluminum imports from China, Hong Kong, Russia, Venezuela, and Vietnam. As part of this option, the U.S. would also impose a quota on all other countries limited to the amount of aluminum and steel they exported to the U.S. last year.
3. This option would have Trump impose a quota on steel and aluminum imports from all sources, limited to 63 percent of the steel and 86.7 percent of the aluminum they shipped to the U.S. last year.
Looming fears of a trade war
China and Russia are mentioned as the primary targets of the recommendations, which are certain to spark fears of a global trade war if implemented. And many U.S. industries have urged the administration to take care since high import tariffs would raise the cost of supplies for major sectors of the economy, reports Deutsche Welle.
Ross said the measures are meant to be broad and are designed to prevent targeted nations from circumventing the limits by shipping through a third country. Yet Ross emphasized that Trump would have the final say, including on whether to exclude certain countries, such as NATO allies, from any actions.
The world’s response is not good
China has already responded, with the Commerce Ministry saying on Saturday the report was baseless and urging the U.S. to “exercise restraint” in using trade protection rules. China also said the U.S. needs to respect the rules of multilateral trade and make a positive contribution to the international economic and trading order.
“If the final U.S. decision affects China’s interests, China must take necessary measures to protect its own reasonable interests,” the ministry added, without giving details.
The German Chambers of Commerce and Industry (DIHK) has warned that if the U.S. were to impose the higher tariffs on steel imports, this would trigger a global trade war. DIHK managing director Martin Wansleben said Wednesday the introduction of tariffs would undermine the “positive investment incentives” introduced by the Trump administration’s recent corporate tax reform. “As appealing as the tax relief from the recent US tax reform may be, new import barriers raise prices and disrupt international production chains,”
Basically, the president and his administration need to look at every move they make as having an impact on the broader, global economic picture. Protectionist attitudes notwithstanding, the U.S. could be painting itself into a corner it can’t get out of.
