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White House announces plan for heavy tariffs on imported steel

Machinist Bill Pham measures a chunk of steel that will become a gear for a mining conveyor at Gear Works in Seattle on Feb. 9, 2018. The White House has announced a plan for heavy tariffs on imported steel. (Mike Siegel/Seattle Times)

WASHINGTON — President Donald Trump said Thursday he will sign an order next week to impose 25 percent tariffs on steel imports and 10 percent tariffs on aluminum, potentially triggering an ugly trade war with China and other countries.

He promised U.S. manufacturers that they will “have protection for a long time. … You’ll have to regrow your industries. That’s all I’m asking.”

“We are going to have much more vibrant companies,” Trump added, during a listening session with several top U.S. manufacturing executives.

The announcement came after a chaotic 12-hour period in which the president pushed for an announcement Thursday and abruptly summoned the executives to the White House.

Trump himself added to the expectations by tweeting early Thursday: “Our Steel and Aluminum industries (and many others) have been decimated by decades of unfair trade and bad policy with countries from around the world. We must not let our country, companies and workers be taken advantage of any longer. We want free, fair and SMART TRADE!”

But later in the morning, the White House appeared to pull back on making a formal announcement. Trump released the details of the plan in response to shouted questions at the end of a media availability.

Administration officials did not give a reason for the back and forth, but it was likely due to a previously scheduled visit to the White House on Thursday by a high-level emissary of Chinese President Xi Jinping. Announcing punitive actions targeting Chinese steel on the same day that Xi’s senior economic advisor, Liu He, is in town will only further rile Beijing and make retaliatory action a certainty.

Some analysts speculated that the confused timing reflected “internal chaos” in the White House, even as Trump and others in the administration are itching to follow through on his campaign promise to get tough on trade and protect American manufacturing.

The president has been weighing various options to limit imported aluminum and steel, which accounts for about one-fourth of American consumption and has left domestic mills running well below capacity. A decision to impose tariffs or quotas would represent one of Trump’s strongest actions to overhaul U.S. trade practices that he has sharply criticized for causing industrial decline and loss of jobs.

It was unclear when Trump would ultimately make an announcement. The president has until mid-April to issue his decision on steel and aluminum tariffs under the U.S. trade law under which the administration is pursuing the punitive measures. Officials are invoking a rarely used and controversial provision of the law that grants the president wide discretion to restrict imports on the grounds of national security.

Domestic producers, along with unions and lawmakers in steel-producing states, have been pressuring Trump to act swiftly, but some in the administration have sought to restrain the president, arguing that such action will hurt some American companies and consumers of steel, and possibly the U.S. economy, and is certain to raise the ire of allies and adversaries alike, and worse, triggering a costly trade war with China.

It will open a Pandora’s box, said David Loevinger, an analyst for TCW Emerging Markets Group in Los Angeles and a former senior Treasury Department official for China affairs. Other countries also will be tempted to take protectionist actions in the name of national security, he said, and other U.S. industries could seek relief from import competition for that same reason.

“It’s a real slippery slope,” he said.

In a report submitted to Trump earlier this year, the Commerce Department concluded that steel imports were “in such quantities” and “under such circumstances” that they threatened to harm national security. The Commerce report urged Trump to consider across-the-board tariffs or targeted tariffs on select countries, as well as quotas, or a combination of these.

Analysts and officials from other countries have questioned such a broad reading of “national security,” given that U.S. steel makers produce more than what’s needed for the Defense Department and its various military programs. Any sweeping new tariffs are expected to be contested at the World Trade Organization.

The Trump administration has argued that the country must ensure it has ample U.S. suppliers of steel to safeguard the nation’s economic security, which encompasses infrastructure such as energy generation, water systems and transportation networks. Commerce Secretary Wilbur Ross has said that the United States has just one domestic maker of transformers that are essential for the country’s electrical grid.

Canada is by far the largest exporter of steel and iron to the United States, and some analysts say that Canada along with some others should be excluded from any tariff measures. China’s exports of steel to the United States have declined over the years, thanks to a host of previously imposed duties for dumping, and accounted for less than 3 percent of U.S. imports of steel and iron last year.

However, China would be a primary target of any Trump action as some Chinese-produced steel is thought to be shipped to America through other countries. Massive overproduction of the metal at Chinese mills is seen as being at the root of depressed global steel prices.

“A remedy, whether tariffs or quotas or a combination of the two, is one piece of the puzzle,” said Scott Paul, president of the Alliance for American Manufacturing, which has advocated for strong relief for domestic steel producers. “Ultimately, the administration needs to work to squeeze out overcapacity in the steel industry globally.”

Imposing curbs on steel would mark the culmination of a Trump administration investigation launched last spring, and any decision will be laden with as much political symbolism as economic significance.

As a candidate, Trump promised to take aggressive actions on steel trade in manufacturing states such as Ohio and Pennsylvania, which Trump later won. The administration blamed rising steel imports for hurting employment and profits of domestic mills.

Trade experts and economists worry that steel tariffs could ratchet up already increasing trade tensions, particularly with China, the United States’ largest trading partner, with whom America has a huge trade deficit.

Recently, Trump approved hefty duties on solar panels imported from China, and his administration also has undertaken various other investigations and actions on Chinese goods and economic practices, raising concern that they could lead to a costly trade war for both sides.