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Administration Warned Against Steel Import Restrictions as Announcement Nears

Tuesday, July 18, 2017
Sandler, Travis & Rosenberg Trade Report

The Trump administration is being urged to be cautious in considering potential restrictions on steel imports in its ongoing section 232 national security investigation. With an announcement expected as early as this week, there is growing concern that such measures could have substantial unintended consequences.

The Department of Commerce self-initiated this investigation in April to determine whether imports of steel threaten to impair national security. If the DOC’s determination is affirmative, and the president concurs, the president has the authority to adjust imports, including through the use of tariffs and quotas. Although the law allows up to 270 days to complete a section 232 investigation and submit recommendations for action, President Trump directed the DOC to expedite this investigation and publicly called for a final report by the end of June. Press reports indicate that the delay could be attributable to disagreements within the administration about what course of action to take.

In a July 12 letter a bipartisan group of former chairs of the President’s Council of Economic Advisers warned of the harm that imposing tariffs on steel imports would cause and urged the administration “not to take this action.” The economists pointed out that top sources of steel include “important allies” like Canada, Brazil, South Korea, and Mexico and that additional tariffs “would likely do harm to our relations with these friendly nations.” These diplomatic costs might be worth it if the tariff hikes generated economic benefits, the letter said, but they “would actually damage the U.S. economy” by raising costs for manufacturers, reducing employment in manufacturing, and increasing prices for consumers.

More than a dozen agriculture organizations sent a similar letter to the president July 11, asserting that if new restrictions are imposed on steel imports “the aftermath could be disastrous for the global trading system and for U.S. agriculture in particular.” Many countries that export steel to the U.S. are also large importers of U.S. agricultural products, the letter said; as a result, “the potential for retaliation [against U.S. agricultural exports] from these trading partners is very real.” More broadly, using national security concerns to justify import restrictions could open the way for a “devastating” flood of similar measures by other countries. “No country can dictate another’s national security needs,” the letter said, “so now every country with a sensitive industry would know that it could follow the example of the United States and find a national security reason to circumvent trade commitments, no matter how flimsy the reason might be.”

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