The Washington PostDemocracy Dies in Darkness

Commerce recommends Trump restrict imports of steel and aluminum, escalating trade conflict

U.S. President Donald Trump, third left, speaks during a meeting with bipartisan members of congress in the Cabinet Room of the White House in Washington, D.C., U.S. on Wednesday, Feb. 14, 2018. Republican lawmakers told Trump the new tariffs he’s mulling for aluminum and steel imports would likely do more harm than good, costing greater jobs among automakers and manufacturers than they protect. Photographer: T.J. Kirkpatrick/Bloomberg (T.J. Kirkpatrick/Bloomberg)

The Commerce Department recommended Friday that President Trump restrict soaring imports of steel and aluminum, saying that relying upon foreign sources for such critical materials poses a threat to national security.

Commerce Secretary Wilbur Ross said that excess production of both metals by producers around the world is depressing prices and resulting in the closure of scores of U.S. factories.

The proposals cheered metals producers that have long sought government protection but alarmed companies that rely on steel and aluminum to make their products as well as farmers worried that they will be caught in the crossfire.

Reaction to the announcement also reflected the way that Trump has scrambled trade politics, with leading Democrats welcoming the prospect of tough action and Republicans warning against measures they said would invite costly retaliation by U.S. trading partners.

The recommendations call for the president to take action under a rarely used provision of U.S. trade law that authorizes tariffs if imports endanger national security. Such trade taxes would be among Trump’s most significant moves and probably would prompt legal challenges at the World Trade Organization and retaliation by U.S. trading partners. He must act within weeks.

“They’re basically saying that economic security is national security. That becomes an excuse for any country in the world to do whatever it wants,” said Rufus H. Yerxa, president of the National Foreign Trade Council, which represents multinational companies such as General Motors, Caterpillar and Procter & Gamble.

The situation surrounding steel and aluminum illustrates Trump’s desire to rewrite the rules of liberalized global commerce, an undertaking backed by presidents of both parties for decades. Since announcing his presidential candidacy in 2015, Trump has promised to eliminate the U.S. trade deficit and return millions of lost manufacturing jobs to shuttered American factories.

So far, the president has made little progress. He withdrew the United States from a Pacific trade deal shortly after taking office and recently imposed tariffs on imported solar panels and washing machines.

But the trade deficit rose 12 percent last year, reaching its highest mark in nine years. And the most consequential actions Trump has long mulled publicly have yet to occur, including final decisions on steel and aluminum imports — initially promised for 2017 — and responding to what the administration says is rampant theft of U.S. intellectual property by China.

“This is potentially a significant step,” said Scott N. Paul of the Alliance for American Manufacturing, backed by steel makers and the steelworkers union. “Now it’s in the president’s hands. It’s time for him to deliver on his promise.”

Commerce officials recommended three potential remedies to curtail foreign shipments of each metal and boost U.S. steel and aluminum production to 80 percent of capacity from today’s depressed levels.

“That level of production is consistent with long-term viability,” said Ross, the commerce secretary.

Currently more than half of U.S. aluminum capacity lies dormant while steel mills are operating at 73 percent of capacity, Ross said. Six aluminum smelters have closed in recent years, and employment in aluminum-making plunged 58 percent between 2013 and 2016, falling to about 5,000 jobs from 13,000, the Commerce Department said.

Yet the industry’s total workforce grew nearly 3 percent to 160,888 from 156,744, according to the Aluminum Association.

Continuing a decades-long decline in the domestic industry, the United States now imports four times as much steel as it exports. Imports now account for 90 percent of U.S. aluminum consumption, up from 66 percent in 2012.

To stave off the import surge, the United States could impose a global tariff on products from all countries, use a mix of tariffs on major producers such China and Russia plus quotas on all other countries, or impose a quota limiting imports to a percentage of last year’s imports for all makers.

“The ultimate imposition of this naive regime would be a disaster for American manufacturing and the good, well-paying jobs it supports,” said Tadaaki Yamaguchi, president of JFE Steel America and the chairman of the Japan Steel Information Center.

But Ross said other nations already protect their markets with higher tariffs than the United States, and he said that he hoped the U.S. “leadership” on limiting imports would prompt other countries to cooperate in limiting excess production capacity.

Global steel plants are capable of producing 700 million tons more than is consumed, almost seven times annual U.S. consumption, Ross said.

The department’s options for curbing steel imports were especially harsh, including a 24 percent tax on all imports or a 53 percent tariff on steel produced in 12 countries — Brazil, China, Costa Rica, Egypt, India, Malaysia, Russia, South Africa, South Korea, Thailand, Turkey and Vietnam — and a quota limiting all others to their 2017 level of shipments.

The final option would limit all steel-producing companies to 63 percent of their sales to the United States last year.

The president has until April 11 to decide what to do about steel imports. His decision on aluminum is due April 19. He could embrace one of the Commerce Department recommendations, with or without changes, or do nothing.

If the president limits the metals imports, he will do so in defiance of warnings from leading members of his own party.

Farm groups also worry their exports will suffer as other countries retaliate for new U.S. trade limits.

“The tariff recommendation made by the Commerce Department today would ultimately lead to net job losses,” said Sen. Mike Lee (R-Utah). “There must be a better way to address the steel industry’s concerns.”

But Trump was urged on by opposition Democrats, including Senate Minority Leader Charles E. Schumer (D-N.Y.), who called for “adopting the full extent” of the Commerce proposals.

The United States last imposed broad tariffs on steel imports in 2002 under President George W. Bush. Companies that use steel, such as automakers and appliance manufacturers, subsequently blamed the import tariffs for the loss of up to 200,000 jobs.

But Ross dismissed the danger of similar layoffs Friday, saying the materials have little influence on the price of products as disparate as soup cans and passenger vehicles. “We really don’t think there’s very much likelihood of that,” he said. “We really don’t buy that argument given the nature of these tariffs.”