Opinion: Tariffs on steel and aluminum are long overdue

Yesterday, President Donald Trump said he had decided to impose tariffs of 25% on all steel imports and 10% on aluminum imports and promised to sign the measures next week. Trade means for steel and aluminum are long overdue.

Trump pledged swift action after announcing investigations into national security threats from steel and aluminum imports almost a year ago. Delays exacerbated the import crisis for thousands of US steel and aluminum workers, many of whom are facing layoffs and plant closure announcements.

The crisis in the steel and aluminum trade is due to the development of massive overcapacity, which has led to import dumping by China and a number of other countries, which are featured in the Department of Commerce’s reports on its Section 232 investigation into the impact of imports of steel and aluminum products in national security.

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The United States is the world’s largest importer of steel, and imports exceed exports by nearly four to one. Ten steel furnaces have closed since 2000, and since January 2000 we have lost 52,000 US steel manufacturing jobs (37.8%).

Meanwhile, global steel production capacity has increased by 127% since 2000 to 2.4 billion tons. Worldwide overcapacity is 700 million tons, almost 30% of that. China is by far the largest steel producer and exporter and the world’s largest source of overcapacity. For some types of steel, such as B. electrical transformers, only one American manufacturer remains.

Between 2013 and 2016, employment in the US aluminum industry decreased by 68%. Six smelters were closed and only two of the five remaining smelters are operating at full capacity despite a surge in US demand for primary aluminum. There is only one American manufacturer of high-quality aluminum alloys that are required for the military aerospace industry. The maintenance and modernization of our infrastructure, which must be done for reasons of economic security, is an important use of aluminum.

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In its reports, which presented tariffs as one of three optional responses, the Commerce Department noted that unfair steel and aluminum imports “threaten national security”. In addition to China, Brazil, South Korea, Russia, Vietnam and six other steel countries were among the top countries named in the trade reports (selected for the highest possible tariffs). and Hong Kong, Russia, Venezuela and Vietnam in aluminum.

China’s exports in particular are so widespread that they have a detrimental effect on world trade in many downstream steel products. This explains why it is necessary to have import duties from all countries and not just from unfair traders like China.

For example, anti-dumping and countervailing duty complaints have been used to reduce or eliminate US direct imports of many basic and semi-finished steel products from China. However, China is now a major exporter of basic steel goods to many other countries, where it is often converted into downstream products such as tubes, rails, and rods, which are ultimately exported to the United States by these downstream manufacturers.

The steel imports of the main steel exporters from China between 2009 and 2015 are shown in the following figure. The largest importers of Chinese steel were South Korea and Japan, followed by the Russian Federation and Turkey. In recent years, Vietnam has risen to the second place among these countries, and imports from Mexico have also increased sharply.

China sells a lot of steel to third countries who then process the steel into products that are sold to the United States.

These countries then export products made from Chinese steel to the US at unfair prices.

Tariffs and quotas can be used to help domestic producers recover from unfair trade. However, they need to be carefully designed to eliminate excess steel and aluminum manufacturing capacity in China and to promote cooperative policies to address these issues. At a minimum, tariffs or quotas should apply to all steel and aluminum products, including basic and downstream goods.

After the tariffs were announced, the United States should work with other nations to develop coordinated responses to the unfair trade in these products.

This announcement was intended to mark the beginning rather than the end of efforts to develop coordinated global responses to the problems of overcapacity and unfair trade in steel and aluminum products.

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