Do Chinese steel imports threaten national security? Trump wants to find out

WASHINGTON — The Trump administration has launched a wide-ranging investigation into whether steel imports threaten national security, a move that could give the president broad legal power to block thousands of steel products from any country in the world.

Secretary of Commerce Wilbur Ross launched the investigation Wednesday, saying a 19.6% increase in steel imports in the first quarter has had "a very serious impact on the domestic industry." He noted that Chinese steel now accounts for 26% of the U.S. market.

President Trump put his stamp on the effort Thursday, signing a presidential memorandum asking Ross to "proceed expeditiously" on the investigation. Calling it a “historic day for American steel,” Trump said his administration would “fight for American workers and American-made steel, and that’s beginning immediately.”

By making steel imports a national security issue, the investigation could give the president the legal authority to place broad restrictions on steel imports into the United States — a move that could potentially have even bigger consequences than the administration's investigation into unfair trade practices.

“Maintaining the production of American steel is extremely important to our national security and our defense industrial base," Trump told reporters in an Oval Office signing ceremony packed with a dozen steel industry executives and the president of the United Steelworkers union. "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.”

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To launch the investigation, the administration has invoked a rarely used legal tool known as a Section 232 investigation. Since it was authorized as part of the Trade Expansion Act of 1962, it has only been used 14 times – most recently in 2001, when the George W. Bush administration conducted a year-long investigation into the imports of iron ore and semi-finished steel, but took no action.

Though the law gives the Secretary of Commerce 270 days to complete the investigation, Trump said he expects it done in 50 days.

The Trade Expansion Act is aimed at protecting industries vital to national security. But Trump's memorandum cast national security in economic terms, asking for the investigation to focus on the impact on American workers and federal tax revenues. CEOs, not generals, were on hand for the signing ceremony.

U.S. Steel CEO Mario Longhi said the move shows that Trump understands "the fundamental importance that our industry has, not just to the national economy, but to our national defense."

Claiming a national security rationale could give Trump broad legal powers, under both domestic and international law. But Trump could be stretching the definition of the World Trade Organization's exemption for national security-related trade restrictions, said Gary Hufbauer, a senior fellow at the Peterson Institute for International Economics.

"This is not a defense-motivated order. This is a commercially oriented order," he said. "The Pentagon, on its own initiative, has never asked for restraints on steel."

But Ross said the two issues are intertwined: If the United States needed a quick buildup in production capacity to support a war effort, highly trained American workers will be needed to produce the highly complex alloys used in armor-plated steel.

In starting the Section 232 investigation, the president is dipping deeper into his legal toolbox. Trump has already signed a number of executive orders targeting unfair trade practices such as dumping, when manufacturers export foreign products at below production costs in order to drive out domestic competition.

The Commerce Department has imposed penalties for steel dumping in 152 cases, with 25 more cases pending, but Ross said those remedies are often unsatisfactory.

"The problem with those countervailing duty and anti-dumping cases is that they’re very limited in nature, to a very, very specific product form one specific country," Ross said. And even if the U.S. takes action, importers can evade the penalties by shifting to another product, or shipping it through a third country, he said.

"It doesn’t solve the whole problem," Ross said. "So we’re groping here to see whether the facts warrant a more comprehensive solution to deal with a wide range of steel products from a wide range of countries."

​Trump said he wasn't concerned that the action would hurt relations with China at a time when the U.S. is asking for China's help to put pressure on North Korea.

"This has nothing to do with China. This has to do with worldwide, what’s happening," Trump said. "The dumping problem is a worldwide problem."

But Ross suggested that China was the largest part of that problem, noting that China's excess capacity alone is enough to swamp the U.S. domestic demand.

"If you look at the capacity charts, particularly from China, you would now find China has over one billion tons of capacity. That represents one-half the capacity in the whole world," he said.