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Trump’s Trade Restrictions Could Miss China and Slam Everybody Else

Trump’s Trade Restrictions Could Miss China and Slam Everybody Else

The Trump administration’s bid to put in place more protectionist trade policies could get a boost as soon as this week, as the Commerce Department wraps up an investigation into the national security implications of steel and aluminum imports. That could mean tariffs or quotas on the amount of metal the U.S. could import from certain countries.

But any restrictions on imports of the key metals would likely fall on friendly U.S. trading partners, rather than on China, the ostensible target of the administration’s concern about steel and aluminum imports.

“If the policies are designed to stop imports, much of that protection is not likely to be applied to China, but instead to imports from countries like Canada, Mexico, Japan, South Korea, and Germany,” said Chad Bown, a trade expert at the Peterson Institute for International Economics. He just published a new analysis on President Donald Trump’s “stealth trade protection.”

That’s because most imports of Chinese steel are already covered by existing trade remedies dating back to the turn of the century; almost 10 percent of Chinese goods imported into the United States are subject to some sort of trade restriction, Bown notes, up from 2 percent in 2001.

If the administration were to follow through on all of its proposed trade remedies, it would only slightly increase the share of Chinese goods with some sort of restrictions, Bown found — but it would triple the amount of goods from the rest of the world subject to restrictions. (Those policies would hit South Korea particularly hard, making its exports to the United States the most restricted.)

Commerce Secretary Wilbur Ross told lawmakers last week that the administration is looking at three possible remedies, in the event the so-called Section 232 probe into steel imports finds a national security risk. It could impose tariffs on on top of any anti-dumping or countervailing duties already in place; it could set quotas that limit the volume of imports from certain countries; or it could use a mix of the two, known as a tariff-rate quota, where imports above a certain level would be hit with tariffs.

The latter is the likeliest course, said Gary Hufbauer, a former U.S. Treasury official also at the Peterson Institute, and Ross has hinted that this might be the preferred option. He told a Senate panel that a combination of quota and tariffs could assuage concerns that any shift in U.S. import policy would lead to a rise in the price of steel, which has worried plenty of U.S. manufacturers who use the stuff.

“The overall impact on inflation, were that to be the route, should be relatively modest,” Ross said. “So we’re very mindful of the need both to protect the domestic steel producers from inappropriate behavior on the part of foreign dumpers, but also to protect the steel consumers, the steel fabricators, the auto companies and everybody else who uses steel.”

A rise in the cost of steel is a serious concern for U.S. steelmakers. Any increase in the cost of raw material would make things pricier for consumers, and could work against Trump’s stated goal of bringing back American jobs, especially in manufacturing and steel.

Trump asked Ross to look into the national security implications of steel and aluminum imports in April, based on a little-used provision in a 1962 law. It has been used only once this century — in 2001 — and that a Commerce investigation did not find any national security threat from steel imports.

Aluminum could be a different matter: The U.S. has only one smelter that makes the advanced alloys needed for high-tech defense products, like the F-35 fighter, and reliance on imports from abroad could pose a weak link in the U.S. defense industrial base.

China’s role in advanced aluminum manufacturing is alarming plenty of folks in Washington. Earlier this month, more than two dozen lawmakers urged the Treasury Department to block the proposed sale of Aleris Corp., a U.S.-based aluminum manufacturer, to a Chinese firm, citing concerns over Beijing gaining access to cutting-edge aluminum technologies used in defense. Aleris says it doesn’t make defense-related goods in the United States.

Ross didn’t give any update into the Section 232 investigation into aluminum imports during his testimony. According to trade data, less than ten percent of U.S. aluminum imports come from China, while more than half comes from Canada.

A trade lawyer familiar with administration deliberations told Foreign Policy that Canada could be exempted from any changes in aluminum import rules. Washington and Ottawa are already dueling over the Trump administration’s decision to target imports of Canadian softwood lumber, a perennial sore spot between the two neighbors.

Photo credit: ALEX WONG/Getty Images