When President Trump announced his executive orders regarding a 25% tariff on imports of steel and 10% on aluminum,, the reaction from Wall Street, major financial interests, the media, and many politicians was uniformly negative. But support has come from main street, global trade analysts, and American workers.
The White House proclaimed last month that “The United States… faces higher barriers on its exports in markets abroad than producers abroad face on their exports to the U.S. Nothing about the principle of comparative advantage would lend itself to a defense of a status quo that imposes higher barriers to exports on America’s producers than on foreign producers. The global trade system has come under strain due to the influence of countries, like China, that violate market principles and distort the functioning of global markets… The Administration prioritizes its attempt to create the conditions that, according to the consensus principles in the economics literature, would maximize the benefits accruing to the United States—and produce gains for our trading partners as well.”
America’s 2017 trade deficit was $566 billion. That represents about 2.7 percent of GDP. Since 2000, it’s averaged that over $500 billion. In prior decades, the deficit was below 2% GDP.
Despite portrayals by some critics that the tariff move was abrupt, it has been considered since the start of the current White House. The Department of Commerce released a report last month revealing that it “found that the quantities and circumstances of steel and aluminum imports ‘threaten to impair the national security,’ as defined by Section 232…”
Key Findings of the Steel Report included:
- The United States is the world’s largest importer of steel. [but] …imports are nearly four times our exports.
- Six basic oxygen furnaces and four electric furnaces have closed since 2000 and employment has dropped by 35% since 1998.
- World steelmaking capacity is 2.4 billion metric tons, up 127% from 2000, while steel demand grew at a slower rate.
- The recent global excess capacity is 700 million tons, almost 7 times the annual total of U.S. steel consumption. China is by far the largest producer and exporter of steel, and the largest source of excess steel capacity. Their excess capacity alone exceeds the total U.S. steel-making capacity.
- On an average month, China produces nearly as much steel as the U.S. does in a year. For certain types of steel, such as for electrical transformers, only one U.S. producer remains.
- As of February 15, 2018, the U.S. had 169 antidumping and countervailing duty orders in place on steel, of which 29 are against China, and there are 25 ongoing investigations.
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Commerce Secretary Wilbur Ross recommended to the President had previously recommended consideration of the following:
1.A global tariff of at least 24% on all steel imports from all countries, or 2. A tariff of at least 53% on all steel imports from 12 countries (Brazil, China, Costa Rica, Egypt, India, Malaysia, Republic of Korea, Russia, South Africa, Thailand, Turkey and Vietnam) with a quota by product on steel imports from all other countries equal to 100% of their 2017 exports to the United States, or 3.A quota on all steel products from all countries equal to 63% of each country’s 2017 exports to the United States.
The problem also should be seen in the overall light of the American trade deficit. In February, The U.S. Bureau of Economic Analysis released its latest report on America’s trade status.
According to the analysis, “the goods and services deficit was $53.1 billion in December, up $2.7 billion from $50.4 billion in November, revised. December exports were $203.4 billion, $3.5 billion more than November exports. December imports were $256.5 billion, $6.2 billion more than November imports. The December increase in the goods and services deficit reflected an increase in the goods deficit of $2.6 billion to $73.3 billion and a decrease in the services surplus of $0.1 billion to $20.2 billion. For 2017, the goods and services deficit increased $61.2 billion, or 12.1 percent, from 2016. Exports increased $121.2 billion or 5.5 percent. Imports increased $182.5 billion or 6.7 percent.”
U.S. Commerce Dept. photo
The Report Concludes Monday.