The Trump administration has opened a wide-ranging probe into whether to curb steel imports in the name of national security, ramping up its campaign to give a more economic nationalist tinge to American trade policy.
Continue Reading Below
"Steel is critical to both our economy and our military," President Donald Trump said at a White House ceremony Thursday with steel industry and labor leaders to highlight the new investigation. "This is not an area where we can afford to become dependent on foreign countries."
The administration is launching the study under a trade law that was regularly invoked in the 1970s and 1980s to justify curbs on imports ranging from machine tools and semiconductors. But the law has rarely been invoked since the 1995 creation of the World Trade Organization, which was designed to discourage countries from claiming such wide latitude to restrict imports.
"Over the last 30 years, there has been a very narrow view as to what would constitute a threat to national security," said Terence P. Stewart, a Washington trade lawyer who represents U.S. manufacturers and has long advocated the more expansive approach to national security Mr. Trump is now exploring.
In the past, Mr. Stewart said, administrations concluded that if key products were available from allies -- like Canada, South Korean and Mexico, three of the largest steel providers to the U.S. -- then losing manufacturing capability wasn't considered a threat. The new administration, he said, has a view "contrary to that, believing we need a strong manufacturing base for adequate national security."
Ohio Democratic Sen. Sherrod Brown, who has long called for tougher limits on steel imports, offered cautious praise, saying "today's announcement is an important step." But he added the probe won't mean much "unless it is followed by tough action that addresses China's overcapacity."
Continue Reading Below
A Chinese foreign ministry spokesman said it was too early to take a position on the announcement, adding "we need to see the scope of the investigation and its targets, then we can issue a judgment."
Foreign steelmakers were quick to criticize the move. The U.S. investigation "will be very bad for the U.S. economy, very bad for steel-consuming industries -- such as construction and manufacturing, which depend on a reliable supply of steel imports -- and bad for foreign steel producers such as the Japanese industry," said Tadaaki Yamaguchi, chairman of the Japan Steel Information Center, the U.S. voice of the Japanese industry.
Despite Thursday's action, there is still uncertainty over just how far Mr. Trump intends to go in fulfilling his campaign promises to steer a new American trade policy based more on blocking imports and curbing trade deficits than on keeping global markets open. There have been signs in recent weeks he was tempering his rhetoric, offering to ease demands on China to cut its trade surplus in exchange for help limiting North Korea's nuclear-weapons program.
Mr. Trump struck a particularly harsh tone Thursday, going beyond the steel measure to take several swipes at Canada, calling its dairy policy "a disgrace" and reiterating his desire to overhaul the North American Free Trade Agreement, which he branded "a disaster."
Amid infighting in his White House, it had appeared that more international-minded business leaders, like Gary Cohn, a former Goldman Sachs Group Inc. president, were gaining influence, while the economic nationalists who shaped the tone of his campaign were getting marginalized. Joining him in the Oval Office were his two chief aides advocating for economic nationalism -- chief strategist Steve Bannon and trade adviser Peter Navarro -- while Mr. Cohn was absent.
Mario Longhi, CEO of U.S. Steel Corp. joined Mr. Trump in the Oval Office, and praised him saying the inquiry "demonstrates your understanding of the fundamental importance" of our industry.
It remains unclear just how far Mr. Trump will actually go in trying to block steel imports, as opposed to using the threat to win concessions from trading partners. The trade law he invoked requires a study that must be submitted to a Commerce Department agency that independently assesses the national-security claim. That agency regularly rejects such claims, as it did when members of Congress asked for national-security protections for steel in 2001.
Mr. Trump's strategy involves significant risks of retaliation. Any unilateral declaration of import restrictions for national security "could have severe economic repercussions," the White & Case law firm wrote in a recent memo posted on the firm's website assessing possible measures the Trump administration could invoke to toughen U.S. trade policy. "A target country would likely retaliate with equivalent measures on U.S. goods," it said.
Import limits could provoke a backlash among steel users -- one reason previous administrations chose to avoid the sweeping approach to protect the steel industry that Mr. Trump said he is considering.
"For every steelworker, there are 60 workers in steel-using industries," said Lewis Leibowitz, a Washington attorney who has worked on cases involving the trade act in the past. "You need competitive steel prices for those industries to be competitive and to export."
Some analysts also raised questions about why new steel-import limits were even needed, since the U.S. already regularly imposes curbs in response to "dumping," where foreign manufacturers sell steel below production costs and home-market value.
As of last December, the U.S. had 113 such "remedies" in place against steel exporters, according to the WTO. That helped push steel imports down sharply in 2016 to $22.3 billion, or 26% below 2015 levels, according to the Census Bureau. The import share of the U.S. steel market fell to 29.9% in 2016 from 34.7% a year earlier, according to the International Trade Administration.
But Trump officials say conventional import limits are easily averted by foreign companies, and the broader national-security justification allows for tougher sanctions.
The move is just the latest in a series of studies that Mr. Trump has commissioned to re-examine trade policy, and he has so far taken little significant action.
Still, Mr. Trump promised a swift investigation -- "30 to 50 days," compared with the 270 allowed by the statute -- adding, ahead of the outcome, that "very soon, we're going to impose very, very strict regulations on unfair competition from the outside world."
When asked if the investigation was mainly focused on China, he said, "this has nothing to do with China. This has to do with world-wide."
And the memorandum the White House released explaining the probe suggested more could be coming for other sectors, citing steel as just one of a series of "core industries" that also include "aluminum, vehicles, aircraft, and semiconductors" as all "critical elements of our manufacturing and defense industrial bases."
--Bob Tita contributed to this article.
Write to Jacob M. Schlesinger at firstname.lastname@example.org, Rebecca Ballhaus at Rebecca.Ballhaus@wsj.com and William Mauldin at email@example.com
(END) Dow Jones Newswires
April 20, 2017 19:34 ET (23:34 GMT)