As the recent Winter Olympics reminds us, cheating is absolutely unacceptable in the international arena. A policy of “zero tolerance” is enforced, and any athletes taking performance-enhancing drugs are immediately disqualified.
Unfortunately, such scrutiny doesn’t always extend to the world of international trade, with countries like China continually using their own version of “steroids” to gain an advantage. Trade cheating has been particularly evident in the global steel market, with overseas competitors pushing the U.S. steel industry to the brink of collapse.
From The Hill
Thankfully, President Trump is willing to strongly confront such cheating, as evidenced by his decision today to impose tariffs on “dumped” imports of both steel and aluminum.
The president’s announcement is particularly commendable since it takes a broad approach to global trade. Specifically, the Trump administration will levy a 25-percent tariff on steel imports from all countries, without exception. The president also announced a 10-percent tariff on aluminum imports from all countries, also without exception.
Steel is particularly significant in the trade arena due to its unique importance in global industry. There are many different types of steel products, ranging from the solid metal used in cars and buildings to the extremely high-tech, lightweight material used in military aircraft.
While the United States once pioneered the world’s steel industry, it is now the largest importer of steel — importing nearly four times as much as its exports.
In sharp contrast, China is by far the world’s largest producer and exporter of steel. In an average month, China produces nearly as much steel as the U.S. does in one year. In fact, China’s rise as a steel producer has been stunning — but it didn’t happen by accident.
Starting in 2004, Beijing began to funnel billions of dollars in subsidies to its steel mills. At times, Beijing also artificially undervalues its currency to lower the cost of its exports. Such currency manipulation is illegal under world trade law, but it has enabled China to sell steel at a particularly low price in the U.S. market.
Thanks to the steroid-like action of massive subsidies and currency manipulation, China is now the world’s largest steel producer — continually churning out massive quantities of surplus steel.
This glut of steel has taken a serious toll on American industry. Since 2000, U.S. steel employment has fallen by roughly 50,000 jobs. A number of key steel-making plants have closed, and for certain types of steel (such as those used in electrical transformers) only one U.S. producer remains.
The Commerce Department recently investigated the impact of all this dumped steel. Its findings were disturbing, with Commerce Secretary Wilbur Ross reporting that the quantities and circumstances of steel imports “threaten to impair the national security.”
With his announcement of tariffs, President Trump has taken an important step to help save the U.S. steel industry from ongoing cheating by other countries. The Commerce Department had already recommended that “Section 232” emergency tariffs be imposed on steel imports to ensure at least “the minimum rate needed for the long-term viability of the industry.” Thankfully, President Trump is now following through.
Trade is a complex issue, of course. And companies that buy steel to make a wide range of products are also hurt by foreign cheating. China and South Korea can still sell their steel in the form of hand tools and auto parts. President Trump should direct the Department of Commerce to fix the downstream cheating problem next.
Overall, the tariffs announced by President Trump will help the U.S. to maintain a vibrant steel industry — and continue its long-standing position as an industrial leader. The alternative — losing its steel industry altogether —would leave the U.S. more vulnerable to the whims of other countries, including those who are not necessarily our friends.