Trump Administration Begins to End Nation's Surrender on Trade

Scott Paul Director, AAM

President Trump is right to call for tariffs on steel and aluminum imports. Tariffs are often used as a last resort, but the domestic steel industry has reached that point. Rather than attacking the president for his proposal, all Americans should applaud him for beginning to end our nation’s wholesale surrender on trade.

The president’s action is already producing results, as U.S. Steel announced Wednesday that it will restart one of its idled blast furnaces in Granite City, Illinois and create approximately 500 jobs.

I have visited communities deeply affected by steel imports.

Coatesville, Pennsylvania is home to the oldest continuously operating steel mill in the country, and is among the last places in America capable of supplying the military with steel armor plate that meets exacting defense specifications.

In 2007, when the Pentagon escalated the war effort in Iraq, Coatesville’s sister mill in nearby Conshohocken turned its production on a dime to fulfill military orders for the steel needed in mine-resistant, ambush-protected vehicles.

Today, both mills teeter on the brink of collapse. So workers there listened intently when candidate Trump promised to rearrange trade agreements and bring factory jobs back to this country.

The president’s announcement last week of a 25 percent tariff on imported steel and a 10 percent tariff on imported aluminum is precisely what he promised. Enacting these tariffs will restore some needed sanity to the global trade in the metals markets, which is in imbalance because of the actions of China’s government.

Beijing has followed a state-led policy with a goal of dominating the global steel industry. This has been so successful that China now makes half the world’s steel. Big government subsidies enable Chinese steel mills to dump steel on world markets at prices below the cost of production, creating unfair competition for steel mills in the U.S. and other nations. There is no end in sight to the overcapacity China has created.

Chinese steel has consequentially flooded outside of its borders and roiled the global market, affecting mills and workers everywhere. 

In the United States – the most open steel market in the world – 10 blast furnaces have closed since 2000, and our remaining mills only operate at roughly 75 percent of their capacity.

More than a quarter of our market is serviced by imports. During a decade of slow but steady economic expansion, the American steel industry has instead remained in a malaise, its workers plagued by the threat of layoffs.

This is the reality in steelmaking communities like Lorain, Ohio, or along the lakeshore in Northwest Indiana. Yet in the face of these facts, many of the president’s fellow Republicans are lashing out at his attempt to address these problems.

Despite that, President Trump beat an almost entirely free-trading field in the 2016 GOP primaries. Though he continues to enjoy support of the conservative base, some Republicans will apparently not stomach even this slightest break from trade policy dogma. 

House Speaker Paul Ryan, R-Wis., and many House Republicans are seeking to block or water down President Trump’s plans, though last year Ryan himself proposed a 20 percent border adjustment tax on all imports.

National Economic Council Director Gary Cohn (before his resignation in protest Tuesday) was marshalling Wall Street collaborators and global companies to attack the tariffs proposal, even though taken to their maximum extent the tariffs would mean a $9 billion cost spread through a $20 trillion economy.

That same crowd completely misjudged America’s years-long economic embrace of the Chinese government, which is currently using this influx of wealth to fortify an enormous mercantilist police state.

These same critics argue tariffs will raise consumer costs and hurt steel communities far more than they help. But the only credible review of former President George W. Bush’s comparable tariffs in 2002 showed most steel consumers didn’t see a significant price hike, and that American steel prices rose even more slowly than global prices did.

Those tariffs allowed a domestic industry staggered by more than 30 bankruptcies time to recover – and even recapture market share before China’s steel juggernaut emerged.

The critics also claim there is no national security basis for protecting American steel. But they conveniently ignore the fact that you can’t build a steel mill quickly in an emergency, and that our steelmaking redundancies are already becoming thin.

The Navy’s Virginia-class submarines rely on specialty armor plate forged in places like Coatesville. There is only domestic producer of electrical steel necessary to build power transformers – the kind of infrastructure needed after a natural disaster in Texas or Puerto Rico.

An economics textbook wouldn’t see anything wrong with America offshoring its entire steel industry, but most Americans would be unnerved to be defended by tanks made with Chinese steel, nor would they support them rolling down Pennsylvania Avenue in Washington in a military parade.

Instead of attacking the president, the critics should instead show us their own plans to stop the economic bleeding in America’s industrial belt.

Because too often, it’s all about President Trump. He’s regularly accused of looking to the past when he speaks of industry, and specifically of steel.

But the people in our steel mill towns know their communities won’t ever again look like they did in the 1950s. That’s not what they’re asking for; they’re simply asking to be included in America’s future.

This tariff will give them a chance at that – and set the tone for how we should now approach China and its state-led capitalism.

Already, China is well on its way toward dominating the markets for future-oriented technologies like semiconductors and artificial intelligence, and it has used trade as a tool to achieve that objective.  China forces technology transfers upon foreign firms operating in its borders. It rampantly abuses intellectual property protections.

And it’s even unsurprising then that the only time Chinese military officers have been indicted in the United States for cyber espionage was for spying on private businesses. What kind? American steel and aluminum industries, among other heavy manufacturing targets.

Those military officers will likely never face trial, but we have a chance now to defend America’s economic interests. Tariffs are a dirty word inside the Beltway. But I suspect that people who live elsewhere, in places like Coatesville, want to defend American jobs.


Reposted from AAM