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Trump launches trade probe targeting Chinese steel exports into U.S.

President Donald Trump signs a directive ordering an investigation into the impact of foreign steel on the American economy at the White House on April 20, 2017. REUTERS/Aaron P. Bernstein

WASHINGTON — President Donald Trump moved on Thursday against China and other exporters of cheap steel into the U.S. market, launching a federal investigation to determine whether foreign-made steel threatens American steelmakers and national security.

Winning praise from U.S. companies that are constantly fighting with foreign competitors, Trump invoked a rarely-used trade law that raises the possibility of new tariffs. The action triggered a rally in U.S. steel stocks.

At a White House ceremony where he was surrounded by U.S. steel executives, Trump signed a memorandum ordering the federal Commerce Department to probe the effect of steel imports on the U.S. defense industrial base.

“Steel is critical to both our economy and our military. This is not an area where we can afford to become dependent on foreign countries,” Trump said.

The global steel market is in surplus. China is the largest national producer and makes far more steel than it consumes. To find buyers for its excess output, China sells steel cheap overseas, often undercutting domestic producers.

“Everything they export is dumping,” said Derek Scissors, Asia economist at the American Enterprise Institute, a Washington think tank.

Commerce Secretary Wilbur Ross cast the decision to initiate the probe as a response to Chinese exports of steel into the United States reaching the point where they now account for 26 percent of the U.S. market.

Chinese exports have risen "despite repeated Chinese claims that they were going to reduce their steel capacity," Ross said.

He said if the U.S. steel industry is deemed to be suffering from too much steel imports, he will recommend retaliatory steps that could include tariffs. Trump ordered a probe under Section 232 of the Trade Expansion Act of 1962, which lets the president impose restrictions on imports for reasons of national security.

News of the move triggered a rally for steel stocks, including U.S. Steel, Cliffs Natural Resources, ArcelorMittal, Steel Dynamics and AK Steel.

The U.S. has nearly 100 plants that make millions of tons of steel annually — with much of that steel made from iron ore mined on Minnesota’s Iron Range.

The U.S. government has attempted to shield them from cheap foreign steel chiefly by filing anti-dumping actions with the World Trade Organization, but the Trump administration said those have had little effect.

Scissors questioned the administration's invoking of Section 232. He said the United States has other ways to take on China over steel trade issues, other than invoking national security.

In October 2001, a Commerce Department investigation found "no probative evidence" that imports of iron ore and semi-finished steel threatened to impair U.S. national security. The Defense Department's annual steel requirements comprise less than 0.3 percent of the industry’s output by weight.

But use of Section 232 could send another political message. “It does say we are not the same kind of administration as previous administrations,” Scissors added.

The Commerce Department will have 270 days to complete the probe. Ross, a former steel executive, said he expected it to be done much sooner.

U.S. Rep. Rick Nolan, D-Crosby, expressed “cautious support” for Trump’s order — as long as any restrictions placed on foreign steel are not compromised by trade deals with China.

“We need a commitment from President Trump that he will continue to hold China accountable for their illegal steel dumping practices. Absolutely no concessions can be made when it comes to ensuring the strength of our U.S. iron ore and steel industry,” Nolan said in a news release.

U.S. Steel — which owns and operates Minntac in Mountain Iron and Keetac in Keewatin, and is part owner of Hibbing Taconite — issued a statement praising Trump’s move:

“For too long, China and other nations have been conducting economic warfare against the American steel industry by subsidizing their steel industries, distorting global markets, and dumping excess steel into the United States. The effects have been staggering. Tens of thousands of workers ... have lost their jobs due to unfair and illegal practices by foreign producers. We have offered the Commerce Department our full cooperation during its investigation.”

The News Tribune contributed to this report.

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