The U.S. Commerce Department on Friday released reports recommending high tariffs on imported steel and aluminum, saying dumping of cheap product threatens to impair national security.
If the proposed tariffs are implemented by President Donald Trump, who is considering them, there are fears that they could increase costs for domestic auto manufacturers and their suppliers, potentially hurting their bottom line.
Conversely, domestic steel and aluminum producers and their workers have called for such a move, saying their businesses have been decimated by a deluge of cheap overseas steel and aluminum coming from China, South Korea and elsewhere.
In a meeting with members of Congress earlier this week, Trump made it clear he is considering implementing the tariffs, saying, “You may have a higher price (of products) … but you’re going to have jobs.” He bemoaned the “empty factories, steel factories, and plants” he said he’d seen, saying, “It’s a very sad thing to look at.”
Some Republican senators cautioned Trump that past attempts to impose tariffs have not had the desired effect, raising the prices of steel throughout the U.S. and forcing auto-parts manufacturers to cut back operations or move outside the country to avoid the tariffs.
Trump downplayed those potential effects, however.
Commerce Secretary Wilbur Ross, releasing the reports of his agency’s investigation into steel and aluminum dumping Friday, said he looked forward to the president’s decision. The so-called Section 232 reports allow for an investigation and recommendation of trade enforcement actions in cases where a potential threat to national security is determined.
The reports found that the health of the domestic steel and aluminum industries is vital to maintaining national security since those materials are integral to infrastructure, vehicles and weaponry.
Concluding that the U.S. imports nearly four times the steel it exports and that steel employment has dropped by 35% since 2000, Ross recommended a global tariff of least 24% on all steel imports or a tariff of at least 53% on steel imports from China, South Korea, Russia and nine other countries, with a quota on all imported steel equal to last year’s levels.
He also offered another alternative to limit all steel exports to 63% of each country’s 2017 exports to the U.S.
On aluminum, the report noted industry employment fell by 58% between 2013 and 2016 and recommended either a 7.7% tariff on all aluminum imports; a tariff of 23.6% on products from China, Hong Kong, Russia, Venezuela and Vietnam with a quota equal to last year’s imports, or a quota on all imports from all countries equal to a maximum of 86.7% of their 2017 levels.
Under the existing rules, Trump can accept, reject or modify the recommendations. He is required to make a decision on the steel recommendations by April 11 and on the aluminum recommendations by April 19.
Kelli Felker, a spokeswoman for Ford, noted that the Dearborn automaker buys most of the aluminum and steel for its U.S. production in the United States, 98% and 95% respectively. However, she noted that a trade group representing General Motors, Ford and Fiat Chrysler Automobiles warned last year of the potential for unintended negative consequences for the auto industry if the administration tries to restrict steel imports.
In a report to the Commerce Department in May, the American Automotive Policy Council warned any such restrictions could lead to a hike in U.S. steel prices, while depressing the price of steel in foreign markets.
“This would lead to lower sales of domestically built cars and trucks in the highly competitive U.S. auto market, a decrease in U.S. auto exports, and a loss of the jobs that those economic activities support. In the end, that would be a net-negative for the U.S. economy, and potentially the U.S. steel industry – the very sector such restrictions were designed to assist,” the report said.
The report urged the administration against unilaterally imposing across-the-board tariff hikes.
“We instead recommend seeking a global solution to address foreign steel production overcapacity, while looking for ways to open markets and increase exports, which would be a win for the U.S. economy, the U.S. automotive and steel industries, and, most importantly, for the American worker,” the report said.
GM responded to a request for comment by noting the automaker’s current use of American steel and aluminum.
“General Motors supports a vibrant and globally competitive U.S. manufacturing base, and already uses American steel and aluminum for the vast majority of its U.S. production requirements,” a GM statement said.
Steve Handschuh, president and CEO of the Motor & Equipment Manufacturers Association (MEMA), a trade group for auto suppliers, said that while he applauds strong enforcement efforts to protect industry, the recommended actions go too far.
“(T)ariffs of this magnitude would be detrimental to the motor vehicle parts supplier industry and the jobs its creates. … It would reduce employment and increase costs to the consumer,” he said. “Such costly remedies would impair the industry’s ability to compete in the global marketplace.”
The Business Roundtable group of CEOs said it feared tariffs “will result in foreign retaliation against U.S. exporters and harm the U.S. economy. Using Section 232 could embolden other countries to use ‘national security’ to restrict U.S. goods and services entering their markets.
Thomas Gibson, president and CEO of the American Iron and Steel Institute, an industry group representing North American steel producers, however, cheered the Commerce Department’s findings.
“We urge the president not to take Section 232 action and, instead, develop a different approach to address global overcapacity of steel and aluminum that does not put the U.S. economy at such high risk.”
“We are grateful that the Commerce Department has found that global steel overcapacity and the resulting surge of foreign steel imports is threatening our national security. We look forward to continuing to work with the administration to address this critical situation,“ Gibson said in a statement.
U.S. Sen. Gary Peters, D-Mich., who participated in this week’s meeting with Trump at the White House said in a statement to the Free Press that he is “concerned a weakened domestic steel industry could affect our national security” and would review the reports and their recommendations. He did not directly address the recommended tariffs and their potential effects, however.
“I have long advocated for the U.S. government to take action to prevent foreign competitors from dumping cheap goods that undercut American businesses across many industries and I introduced legislation this week to help small businesses fight unfair dumping practices,” Peters said.
