Broad Tariffs or Quotas on Steel and Aluminum Among Commerce's Section 232 Recommendations

If the administration goes for the first option, a universal tariff, Ross recommended 7.7% on aluminum and 24% on steel. The second, more targeted path would be to levy 23.5% tariffs on aluminum products from China, Hong Kong, Russia, Venezuela and Vietnam, and to levy a 53% tariff on steel from Brazil, China, Russia, South Korea, India, Egypt, Costa Rica, Turkey, Thailand, South Africa and Vietnam. Ross recommends pairing the tariffs with a quota on all other countries that would restrict U.S. imports of their products to the same amount they sold in 2017. All tariffs would be in addition to existing tariffs, including antidumping and countervailing duties.

The third option, a worldwide quota on imported steel and aluminum from all countries, would restrict steel imports to 63% of each country's 2017 exports to the U.S. Aluminum products would be restricted to 86.7% of each country's 2017 exports.

The recommendations apply to unwrought aluminum, aluminum bars, rods and profiles, castings and forgings, and pipes and tubes. They apply to stainless steel, carbon and alloy flat products, such as sheets; long products, such as bars and beams; pipe and tube products; and semi-finished products from these steel categories. They do not apply to finished products, such as coat hangers or aluminum cans.

The president can choose any one of the six options Ross has recommended; he can modify any of those approaches; or he can decline to take action at all. Ross declined to predict what Trump might do. “But I do re-emphasize he is not bound by these exact recommendations,” he said. The World Trade Organization allows an exception for national security in its rules on tariffs, but Ross acknowledged challenges to any policy are likely.

The president held a meeting at the White House with 19 lawmakers, and Ross, earlier in the week, and most Republicans warned that broad tariffs could lead to trade wars and could create more job losses at factories that buy these materials than would be added at aluminum smelters or steel mills (see 1801120023). “232 is a little like old-fashioned chemotherapy,” House Ways and Means Chairman Rep. Kevin Brady, R-Texas, said at the meeting. “It isn’t used as much because it can often do as much damage as good.”

Ross -- who bought, restructured and sold multiple bankrupt steel mills before joining the administration -- dismissed those who say that the last round of steel tariffs led to more job losses than gains. “We really don’t buy that argument,” he told reporters Friday.

Rather, he focused on the pain in steel and aluminum industries. He said that from 2013 to 2016, aluminum industry employment fell 58 percent as six smelters shut down and imports rose to 90 percent of the U.S. demand for primary aluminum. Since 1998, steel employment fell 35 percent. The administration cannot predict how much employment might rise if any of these measures are taken, since automation makes production possible with far fewer workers. Ross noted that at a time of full employment, it could be difficult for expanding mills or smelters to find workers, as well.

Any of the paths outlined in the report are designed to boost domestic aluminum and steel production to 80 percent of capacity. Currently, the department estimates aluminum is at 48 percent of capacity and steel production is around 73 percent. If the president followed the universal quota recommendations, each country’s aluminum exports to the U.S. would be reduced by 13.3 percent from 2017 levels, and each country’s steel exports to the U.S. would be reduced by 37 percent.

Targeted remedies for unfair trade practices -- antidumping and countervailing duties -- have been ineffective because “serial offenders can evade by transshipping through a third country or by processing [metal] into a slightly different product,” Ross said. He said the countries selected for the targeted tariff options have had the highest rate of increase in exports to this country, and many have a history of participating in transshipment schemes to avoid AD/CVD.

The U.S. currently has 169 AD and CVD orders on steel and two AD and CVD orders on aluminum, but in Ross’s view, they have not slowed the damage to domestic producers. At a Senate Finance subcommittee field hearing on Feb. 16 witnesses agreed that AD and CVD enforcement is inadequate (see 1802160037), calling it "whack-a-mole." “No matter what tool industry has sought to use it has not stopped the unfair trade,” said Scott Paul, president of the trade group Alliance for American Manufacturing.

Sen. Sherrod Brown, D-Ohio, reacted to the steel report by saying that Trump should not wait until his April deadline to take action. "Ohio steelworkers don’t need a report to tell them they are losing jobs to Chinese cheating," he said in a statement. The steel industry "is facing an onslaught of imports as we wait for a decision."

Washing machine and solar panel manufacturers also accelerated imports when they expected tariffs could be coming. However, Ross pointed to those tariffs as producing the results the administration wants. While that investigation was pending, two Korean manufacturers began building factories in the United States, Ross said with satisfaction.