The U.S. Department of Commerce recently recommended that President Donald Trump impose new taxes and regulations on aluminum and steel imports – and recommended a top 24 percent global rate. Trump himself reportedly said that he might favor a 25 percent rate, because it’s a round number that sounds better.
The president is right that a round number is ideal for aluminum and steel import taxes. The ideal number is zero.
The Commerce Department’s recommendations were based on the president’s request to review the effects on national security of steel and aluminum imports under Section 232 of U.S. trade law. This obscure law has not been used since 2001, when the Commerce Department concluded “the U.S. iron ore and steel industries’ production levels and production capacity far exceed the amounts needed to satisfy U.S. national security requirements.” According to the Department of Defense at the time, “imports of iron ore and semi-finished steel do not currently affect the national security when assessed in terms of the ability to meet defense demands.”
That remains true today for both steel and aluminum.
In its report to Trump, the Commerce Department didn’t even try to make a serious case that imports of steel or aluminum are harming U.S. defense capabilities. It even conceded that “military consumption of aluminum is a small percentage of total consumption.”
Instead, it asserted that Trump has vast authority to restrict imports affecting industries including agriculture, transportation, energy, health care, financial services and others. Using this vague, all-encompassing criterion, the Commerce Department found that imports threaten to impair U.S. national security, and presented Trump with a variety of possible import restrictions.
He should reject them all.
New taxes or regulations would make it more expensive to make things in the United States while simultaneously increasing the supply of steel and aluminum available to foreign competitors.
Political Cartoons on the Economy
For example, according to the American Automobile Policy Council, “We are concerned with the unintended consequences the proposals would have, particularly that it will lead to higher prices for steel and aluminum here in the United States, compared to the price paid by our global competitors. This would place the U.S. automotive industry, which supports more than 7 million American jobs, at a competitive disadvantage.”
Driving up the cost of needed inputs like steel and aluminum would encourage U.S. industries to relocate abroad. President George W. Bush learned this the hard way when he imposed steel tariffs back in 2002. The President of the Air-Conditioning and Refrigeration Institute observed: “Steel is a fundamental component of everything we make – every day we pay extra for steel means more industry shifting to Asia.”
Encouraging offshoring is exactly the opposite of what Trump promised American voters: “I just want to let all of the other companies know that we’re going to do great things for business. There’s no reason for them to leave anymore.”
Import taxes would also reduce U.S. energy security and deter from Trump’s goal of energy dominance. Steel and aluminum are critical inputs for energy exploration, production and transportation.
When all else fails, crony capitalists seeking special treatment from the government fall back on dubious national security claims. For example, U.S. sugar growers call imports of sugar “a security risk,” and use this to defend protectionist policies that force U.S. consumers to pay twice the world price for sugar. American shipbuilders assert that banning the use of foreign-built ships for domestic shipping is “critical to our country’s economic security.” As a result of their beloved Jones Act, it’s now cheaper to ship U.S. petroleum from the Gulf Coast to Canada than to East Coast U.S. refiners.
Our own national defense industries would be forced to pay more for the aluminum and steel they need to help protect Americans if Trump restricts imports. The Motor & Equipment Manufacturers Association noted that aluminum import restrictions “would jeopardize our ability to manufacture in the United States and to provide these critical products to the U.S. defense industry,” and the Forging Industry Association observed that steel restrictions could jeopardize its members’ ability to supply the U.S. military.
Trump has repeatedly promised to make the United States the best place in the world to do business. He should keep his promise, and reject the Commerce Department’s proposed hit to U.S. manufacturers and national security.