By now, the world has certainly heard about President Donald Trump’s plan to impose tariffs on U.S. imports of steel and aluminum. As envisioned by Trump, tariffs of 25 percent on steel and 10 percent on aluminum would be imposed globally.

Domestic views of the plan remain mixed at best.

The world of steel, as expected, has cheered the potential move. On March 7, United States Steel Corporation responded with an immediate promise to ramp-up production. It will restart one of two blast furnaces and the steelmaking facilities at its Granite City Works, an integrated steelmaking plant in Granite City, Ill. 

“The additional capacity will support anticipated increased demand for steel in the U.S. from the pending action announced by President Trump on March 1, 2018, as a result of the U.S. Department of Commerce national security investigation on steel imports,” it says.

“Our Granite City Works facility and employees, as well as the surrounding community, have suffered too long from the unending waves of unfairly traded steel products that have flooded U.S. markets,” U. S. Steel President and Chief Executive Officer David Burritt said in a statement. “The Section 232 action announced President Trump recognizes the significant threat steel imports pose to our national and economic security.  The President’s strong leadership is needed to begin to level the playing field so companies like ours can compete, win and create jobs that support our employees and the communities in which we operate as well as strengthen our national and economic security.”

Both Granite City Works blast furnaces and its steelmaking facilities were idled in December 2015 and the plant’s hot strip mill was idled in January 2016 in response to challenging market conditions, including global excess steel capacity and unfairly traded imports. 

The company anticipates calling back approximately 500 employees beginning this month.  The restart process could take up to four months.

On Feb. 16, Commerce Secretary Wilbur Ross released reports on investigations into the impact on our national security from imports of steel mill products and from imports of wrought and unwrought aluminum. These investigations were carried out, as noted by U.S. Steel, under Section 232 of the Trade Expansion Act of 1962.

The Department of Commerce found that the quantities and circumstances of steel and aluminum imports “threaten to impair the national security.”

The President is required to make a decision on the steel recommendations by April 11, 2018, and on the aluminum recommendations by April 19, 2018.

Key findings of the steel report:

The United States is the world’s largest importer of steel. Imports are nearly four times exports.

Employment has dropped by 35 percent since 1998.

World steelmaking capacity is 2.4 billion metric tons, up 127 percent from 2000, while steel demand grew at a slower rate.

The recent global excess capacity is 700 million tons, almost 7 times the annual total of U.S. steel consumption.

China is by far the largest producer and exporter of steel, and the largest source of excess steel capacity. Their excess capacity alone exceeds the total U.S. steel-making capacity.

On an average month, China produces nearly as much steel as the U.S. does in a year. For certain types of steel, such as for electrical transformers, only one U.S. producer remains.

As of February 15, 2018, the U.S. had 169 antidumping and countervailing duty orders in place on steel, of which 29 are against China, and there are 25 ongoing investigations.

Recommendations of the steel report include a global tariff of at least 24 percent on all steel imports from all countries, or a tariff of at least 53 percent on all steel imports from 12 countries (Brazil, China, Costa Rica, Egypt, India, Malaysia, Republic of Korea, Russia, South Africa, Thailand, Turkey and Vietnam).

Another suggestion: a quota on all steel products from all countries equal to 63 percent of each country’s 2017 exports to the U.S..

Each remedy, the report says, is intended to increase domestic steel production from its present 73 percent of capacity to approximately an 80 percent operating rate, the minimum rate needed for the long-term viability of the industry. Any tariffs and quotas would be in addition to any duties already in place.

The report also recommends that a process be put in place to allow the Secretary of Commerce to grant requests from U.S. companies to exclude specific products if the U.S. lacks sufficient domestic capacity or for national security considerations.

Key findings of the aluminum report:

Aluminum imports have risen to 90 percent of total demand for primary aluminum, up from 66 percent in 2012.

From 2013 to 2016 aluminum industry employment fell by 58 percent, six smelters shut down, and only two of the remaining five smelters are operating at capacity, even though demand has grown considerably.

Military consumption of aluminum is a small percentage of total consumption and therefore is insufficient by itself to preserve the viability of the smelters. For example, there is only one remaining U.S. producer of the high-quality aluminum alloy needed for military aerospace.

The Commerce Department has recently brought trade cases to try to address the dumping of aluminum. As of February 2018, the U.S. had two antidumping and countervailing duty orders in place on aluminum, both against China, and there are four ongoing investigations against China.

Ross recommended to President Trump three alternative remedies for dealing with the excessive imports of aluminum. These would cover both aluminum ingots and a wide variety of aluminum products.

A tariff of at least 7.7 percent on all aluminum exports from all countries, or a tariff of 23.6 percent on all products from China, Hong Kong, Russia, Venezuela and Vietnam. All the other countries would be subject to quotas equal to 100% of their 2017 exports to the United States, or a quota on all imports from all countries equal to a maximum of 86.7 percent of their 2017 exports to the U.S. Each of the proposals is intended to raise production of aluminum from the present 48 percent average capacity to 80 percent, a level that would provide the industry with long-term viability.

The report recommends that a process be put in place to allow the Secretary to grant requests from U.S. companies to exclude specific products if the U.S. lacks sufficient domestic capacity or for national security considerations.

Count aluminum companies on the conflicted side of the ledger. In a letter to President Trump, Aluminum Association President and CEO Heidi Brock expressed concerns about a global tariff on aluminum products imported into the U.S. The association’s 114 member companies member companies represent the entire industry value chain and the vast majority of domestic aluminum production.

“On behalf of the 713,000 U.S. jobs our industry supports, we are grateful for the attention that you and your administration have dedicated to our industry,” Brock wrote. “However, we are deeply concerned about the effects of a global tariff on aluminum production and jobs in the U.S."

The letter proposes alternative approaches to address trade challenges facing the domestic aluminum industry.

Address Chinese overcapacity: Move toward immediate government-to-government negotiations with China to address persistent overcapacity in both primary and semi-fabricated aluminum sectors.

Targeted tariffs: Implement a remedy that will address Chinese overcapacity through targeted action on China and possibly other countries with an established history of duty evasion and circumvention.

Exemption for vital trading partners: Avoid disruption of current trading relationships between the United States and critical trading partner countries that operate as market economies (including Canada and the European Union).

Support full industry value chain: Address the needs of the entire domestic aluminum value chain to avoid unintended consequences for U.S. aluminum manufacturing jobs in mid-and-downstream production processes.

Import monitoring system: Adopt an aluminum import monitoring system to provide greater transparency for aluminum and aluminum products entering the United States.

“Unfortunately, the tariffs proposed will do little to address the fundamental problem of massive aluminum overcapacity in China, while impacting supply chains with vital trading partners who play by the rules,” Brock wrote. “We fear that the proposed tariff may do more harm than good, hurting rather than helping the 97 percent of aluminum industry jobs in mid-and-downstream production processes.”

U.S. Chamber of Commerce President and CEO Thomas Donohue was also skeptical of the tariff plan.

“[We are] very concerned about the increasing prospects of a trade war, which would put at risk the economic momentum achieved through the administration’s tax and regulatory reforms,” he wrote. “We won’t drive the economy to over 3 percent growth or continue to create jobs if we go down this path. We urge the administration to take this risk seriously and specifically to refrain from imposing new worldwide tariffs on steel and aluminum.” 

“These new tariffs would directly harm American manufacturers, provoke widespread retaliation from our trading partners, and leave virtually untouched the true problem of Chinese steel and aluminum overcapacity,” he added. “Alienating our strongest global allies amid high-stakes trade negotiations is not the path to long-term American leadership.”