President Donald Trump on Thursday, citing national security concerns, signed an executive action expediting a Commerce Department probe examining whether manipulated foreign steel prices could hinder his envisioned military buildup.
Commerce Secretary Wilbur Ross told reporters that the investigation was formally launched on Wednesday evening over concerns that the U.S. steel industry would be unable to keep up with demand of the Trump administration’s planned military buildup. Contracts for major Pentagon weapons programs typically are accompanied by stipulations that combat gear must be built using American steel.
But with the U.S. industry operating at only around 70 percent of its capacity — and with China and other countries “dumping” their steel products into the country at reduced prices — the Trump Commerce Department decided to look into the matter before the Defense Department drives up domestic demand via possible new orders for tanks, ships, aircraft and other combat equipment.
The study will examine the domestic production needed to meet all U.S. defense needs, the domestic industry’s capacity to meet those requirements, and the necessary related human needs and resources, Ross said. It also will look at the “importation of goods in terms of their quantities and use,” the relation of “economic welfare to national security,” effects of lower foreign prices on things like U.S. unemployment and government revenue, and “the impact of foreign competition on specific domestic industries,” Ross said.
The investigation, which will focus on China in a major way, comes as Trump is depending on that country’s president, Xi Jinping, to lean on North Korea to drop its missile and nuclear arms program. Trump has said it would not make sense to label Beijing a “currency manipulator,” as he did repeatedly as a candidate, while Xi is helping the effort to corral the Hermit Kingdom. So why press China on steel?
“The reason for it now is that steel is an important factor in our infrastructure as it relates to national defense,” Ross said. “We’re building up aircraft, we’re building up our [naval] fleet, we’re building more tanks, we’re building all kinds of military equipment.
“If it turned out they had to ramp up, the question is: Are we getting to the point that the industry couldn’t deal with that?” the Commerce secretary said.
(Congress has yet to sign off on the Trump administration’s defense plans, including $30 billion more in fiscal 2017 and a 10 percent hike over the Pentagon’s 2016 funding level.)
In recent years, the department has brought 152 steel-related cases, Ross said. But officials decided a more comprehensive study was needed because those kinds of cases examine and deal with only a “very, very specific product from a very, very specific country.”
“That country will then start shipping something else in, or they’ll modify something slightly [in the] product to get around the [U.S.] order,” the secretary told reporters at the White House. “Or they will ship it in through another country and pretend it came in through the country not subject to the duty.”
“It’s a fairly porous system,” he said. “It doesn’t solve the whole problem. So we’re groping here to see whether the facts warrant a more comprehensive solution that would deal with a very wide range of steel products and a very wide range of steel products.”
Commerce and White House officials decided to look into a possible action after growing concerns about China’s actions to influence the steel market.
“Despite repeated Chinese claims that they were going to reduce their steel capacity, when, in fact, they have been increasing it consistently,” Ross said, saying those prices rose 19.6 percent during the first few months of this year alone.
Ross stressed “no decision has been made to take any concrete action as of yet.” But he said that some kind of tariff — perhaps on multiple countries — could be one recommendation out of the investigation.
“The net effect of a tariff, if that were what we came with [as] a recommendation, won’t be to prohibit imports, it just will be to change the price,” he said.
Trump signed an memorandum Thursday expediting that review, which means it should be completed sooner than this type of probe’s typical 270-day window.
The Commerce Department will hold public hearings and seek public comment as it conducts the review.
The steel issue was a big one for Trump on the campaign trail. On Tuesday, he alluded to the memo two days before he put pen to paper.
“And for the first time ever, we are going to crack down on foreign bidders that used dumped steel and other subsidized goods to take contracts from workers like you,” Trump said Tuesday during remarks in Wisconsin about a “Buy American and Hire American” executive order he signed that day. “They take them away and they’ve been doing it for a long time. Not going to happen anymore.
“We are finally standing up for our workers and for our companies,” he said to a crowd at a tool plant in Kenosha.
To do so, the Trump administration is using investigative powers granted to the office of the president by Section 232(B) of the Trade Expansion Act.
“The purpose of the investigation is to determine the effect of imports on the national security,” according to the Commerce Department. “Investigations may be initiated based on an application from an interested party, a request from the head of any department or agency, or may be self-initiated by the secretary of Commerce.”
During the presidential campaign, candidate Trump vowed that, if elected, he would use “every tool under American and international law” to take on what he views as “unfair” trade tactics by other countries that he says hurt American workers.
Existing laws give any president, with Congress’ blessing, “broad authority” to take a number of actions on trade, including pulling out of global agreements to imposing extra duties on unfair practices by other countries or labeling another nation a currency manipulator, according to Hogan Lovells, a law firm that deals in trade matters, among many others.
“These steps do not require Congressional action or approval, as U.S. trade law vests broad authority in the president, without the checks and balances or legal constraints that exist under other trade procedures,” according to a fact sheet on the law firm’s website. “Thus, President Trump would face only limited legal constraints in implementing [his] campaign promises.”
The Trade Expansion Act is one of those legislative branch-blessed laws.