Five things to know about Trump’s steel order

President Trump is looking to crack down on a flood of imports to the United States that many in the administration argue have led to job losses and are hurting the U.S. economy.

On Thursday, President Trump signed an executive order launching a wide-ranging investigation into whether certain steel imports from countries like China are hurting national security.

Commerce Secretary Wilbur Ross said the probe will allow the new administration to more broadly evaluate potentially harmful imports.

Here are five things to know about the steel order. 

 

1. China is a key target

China is the obvious target of the order, even as the administration claims their focus is larger.

On Thursday, Trump said the latest policy order “has nothing to do with China. This has to do with worldwide, what’s happening. The dumping problem is a worldwide problem.”

But the order comes as the president walks a tightrope with the Asian giant. On the campaign trail, Trump vowed to get tough with China on its trade and currency practices. But after meeting Chinese President Xi Jinping earlier this month, the president’s rhetoric mellowed somewhat on China, which he hopes will help rein in North Korea.

Others, though, are directly pointing the finger at China and putting pressure on the administration to crack down.

Ohio Sens. Sherrod Brown (D) and Rob Portman (R) have urged the Obama and Trump administrations to address China’s excess steel capacity through stronger trade enforcement.

Brown said the administration’s probe won’t mean much “unless it is followed by tough action that addresses China’s overcapacity.”

Ross also tried to sidestep the focus on China, arguing that the administration is looking more broadly at the steel issue.

He the current system “fairly porous” and one that has failed to solve the dumping of cheap imports.

The U.S. already has more than 150 countervailing and antidumping duties on steel imports, including some as high as 265 percent on steel coming from China and other foreign competitors.  

A more sweeping move to target steel imports could anger major allies.

Ross has also been cautious about what actions could follow the review, saying he doesn’t want to derail global trade with higher tariffs.

“No decision has been made to take any concrete action as yet, but the net effect of a tariff, if that were what we [made] as a recommendation, won’t be to prohibit foreign imports, it would just be to change the price,” Ross said.

 

2. Trump is playing to his base 

During the campaign, Trump leveled harsh criticism against countries including China he argued were trade cheaters, energizing his base across the Rust Belt where steel and manufacturing reign.

Trump rallied his base by arguing that foreign countries were dumping vast amounts of steel into the United States, which he said killed jobs and hurt steel companies.

Trump’s supporters will likely cheer the steel order.

But there is still uncertainty about how far Trump can go to make good on campaign promises to get tough on trade.

Some trade experts argue that more tariffs and protectionism from the U.S. will lead major trade partners to retaliate and raise their own barriers.

They say that while the steel order might be popular with Trump’s base, it could hurt consumers in the long run. 

Steel tariffs would increase costs for U.S. manufacturers on imports, eventually hitting the public. 

“U.S. consumers will suffer, as well as manufacturers that rely on imported inputs to remain competitive, as will those companies’ employees,” wrote Chad Bown is a senior fellow at the Peterson Institute for International Economics, in the Washington Post on Friday. 

 

3. Trump is playing up the defense angle

Trump has touted his administration’s focus on bulking up the U.S. military from aircraft carriers to more planes. 

“Maintaining the production of American steel is extremely important to our national security and our defense industrial base,” Trump said Thursday in the Oval Office.

“Steel is critical to both our economy and our military,” he continued. 

“This is not an area where we can afford to become dependent on foreign countries.”

Ross echoed that sentiment saying that the U.S. steel industry has room to grow in capacity and could help accomplish the administration’s military goals. 

 

4. Trump’s new policies may not pass muster with international rules

The administration can take action against imports that threaten national security. The rarely used national security provision was last invoked in 2001 under President George W. Bush. 

Most of the time, though, nations use the World Trade Organization to settle disputes. In cases involving anti-dumping or countervailing duties, those decisions are clearly defined by international law. 

“WTO rules that might guide the process are much more poorly defined than is the case for anti-dumping, countervailing duties or safeguards,” Bown said.

Bown explained that the national security exception may be more vague and lead to more disputes with other nations and potential retaliation.

“Because there are no clearly accepted guidelines, the justification for use of the national security exception is also difficult to refute,” he wrote. “It can, therefore, be easily abused.

“New import restrictions arising under that area of U.S. law really are akin to the ‘nuclear option’ — their use really puts the entire system of international trade law at risk,” he said.

 

5. The effort echoes a move by President George W. Bush 

Most of the time, the clear majority of trade cases are brought by U.S. workers or their businesses. 

But in 2001, the Bush administration self-initiated a steel case that covered more than $17 billion in imports to help bolster U.S. companies.

In March 2002, Bush announced temporary safeguards — tariffs on 10 steel groups — to help the U.S. industry adapt to the influx of foreign steel imports. 

The International Trade Commission investigated and found that increased steel imports were damaging the domestic industry.

Bush at the time said the temporary restraints on steel imports were allowed under WTO rules.

In a release from the White House at the time, Bush said the steel industry “must use the temporary help today’s action provides to restructure and ensure its long-term competitiveness.