Trump to Revive 1962 Law to Explore New Barriers on Steel Imports

By Jacob M. Schlesinger and William MauldinFeaturesDow Jones Newswires

President Donald Trump is ramping up his tougher "America First" trade policy with plans to revive a decades-old, rarely used law to explore imposing new barriers on steel imports, the White House announced Wednesday night.

Mr. Trump plans a signing event at noon Thursday to mark a special investigation under the 1962 Trade Expansion Act, which allows emergency trade sanctions on "national security" grounds, according to an administration statement.

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The statement didn't elaborate on the specific nature of the investigation, but people familiar with the matter said it would focus on steel imports, and that representatives of the steel industry would attend the ceremony. Another person familiar with the planned announcement said it could include other products deemed "important to defense."

The U.S. government hasn't used the law to impose penalties since the creation of the World Trade Organization in 1995, which discourages such unilateral sanctions. The law was most famously used by President Richard Nixon in 1971 to impose an across-the-board 10% import surcharge to contain the U.S. trade deficit at the time.

The planned ceremony follows a Trump rally Tuesday at Wisconsin tool factory where he ordered aides to craft new policies increasing "Buy American" provisions for government procurement spending. In the speech unveiling the action, he blasted the WTO as "another one of our disasters," and vowed to accelerate acting on his campaign promises to rewrite American trade policy.

This week's moves mark a shift in emphasis for the new president following a series of actions that seemed to signal he was toning down his harsh trade rhetoric.

He announced last week that he was dropping a pledge to brand China a currency manipulator, and would curb his criticism of Beijing's trade practices in return for Chinese cooperation in reining in North Korea's nuclear weapons program. An early draft of his administration's plans to renegotiate the North American Free Trade Agreement included relatively modest changes, drawing cheers of relief from big business and free-trade advocates, and sharp complaints from labor unions and trade critics.

But the move this week shows that Mr. Trump means to carry through on his vows to at least explore the use of little-used trade powers to threaten American trading partners he sees as unfairly taking advantage of American markets.

In a July campaign speech in Pennsylvania, he said that "if China does not stop its illegal activities, I will use every lawful presidential power to remedy trade disputes, " then reeled off a number of options for taking a tougher stance on trade enforcement, including the 1962 law.

Despite the symbolic significance of launching the probe, it is unclear whether Mr. Trump intends to apply it to a broad portion of steel imports or a narrow sector. It is also unclear whether he will, in the end, impose sanctions. Under the law, the Commerce Department has to apply for penalties to its internal Bureau of Industry and Security. The last two times probes were launched under the law -- in 1999 on oil imports and in 2001 on iron and steel -- the bureau rejected the request, according to a recent memo by the White & Case law firm.

American steelmakers have been primarily concerned about the heavy flow of steel out of China and its impact on their competitiveness, though they also worry about U.S. imports from South Korea and other countries.

The investigation, which was being initiated late Wednesday by the Commerce Department, focuses broadly on steel but doesn't target a particular country, a U.S. official said. The Commerce Department's recommendations at the end of the probe could focus on specific steel products used in defense, the official said, underscoring that the results won't be known for some time.

The probe would be conducted under Section 232 of the Trade Expansion Act. Section 232 is a particularly powerful tool because, unlike other trade challenges, it doesn't require the U.S. to prove that American industry has been harmed by foreign competition in order to take action to restrict imports. Instead U.S. officials can recommend action proactively to protect national security.

But it has clear drawbacks. U.S. officials might find it hard to show that domestic production of steel -- traded heavily around the world -- is vital to national security. Also, if Mr. Trump moved to restrict steel imports, then China or another country affected could retaliate against U.S. products in similar fashion, trade lawyers say. The countries could also challenge Washington at the World Trade Organization and win the right to retaliate.

The Obama administration threatened a year ago to take unspecified trade action over Chinese steel after U.S. producers, which typically have much higher production costs, complained that excess Chinese steel exports are weighing on global prices and threatening to drive them out of business. Some trade experts suggested at the time that the Obama officials should launch a Section 232 case, but top officials dropped the warnings against China after Beijing committed to curbing excess production in June.

Peter Nicholas contributed to this article.

(END) Dow Jones Newswires

April 20, 2017 00:23 ET (04:23 GMT)