The steel war is nigh

Cranes stand sentry at loading docks in New Jersey. (PHOTO: Brian Auer, Flickr CC)

Things are moving quickly when it comes to substantial new American tariffs on foreign steel and aluminum.

As I reported last week, President Trump signaled new tariffs in meetings. Two days later, his commerce department issued plans to raise steel tariffs by 53 percent. That’s a huge hike. Though the president has yet to make the final authorization, it seems unlikely he would back off this plan now.

The Commerce Department under Secretary Wilbur Ross, a former steel magnate, recommends using a trade provision called Section 232, which cites national security concerns as the reason for the blanket tariffs on foreign commodities.

This article from CNN Money detailed some of the challenges of using Section 232:

If Trump invokes Section 232 of the Trade Expansion Act, as is recommended, that means he believes steel imports are hurting national security.

Experts say that rationale is flimsy, and isn’t likely to hold under the rules established by the World Trade Organization.

In fact, it could be deemed such a flagrant violation of the rules that it could open the door for tit-for-tat responses from other countries, according to Matt Gold, an international trade law expert at Fordham University.

“When we commit a major violation of global trading rules, it really shakes the foundation of the whole global trading system,” Gold said.

China has already threatened to retaliate, according to several reports. But as the CNN article showed, China isn’t even among the top exporters of steel to the United States. Canada and Brazil are much larger producers of steel entering the United States, and they, too, would be hit by the tariffs.

We know that President Trump isn’t afraid of threatening trade wars, even with allies. That’s what makes this so unusual. We’ve been to this brink before, but have never really tasted what reprisals from China, Canada and Europe feel like in our economy.

There’s one theory that it’s worth a shot. That perhaps we strengthen our domestic industries so much that we counterbalance any negative effects on our currency and in the prices of goods we are used to buying cheap. Certainly in the short run the Iron Range will benefit from red hot production at area taconite mines. Perhaps this even loosens up investment for new projects.

But there’s another theory, that we may find our farmers sitting on produce and wheat they can’t sell overseas. Ditto for American producers of exported goods, like airplanes and cars. We could see huge price increases in a lot of things right when our economy is entering inflation. We could see Iron Range mines make a meteoric rise only to fall back to earth with a domestic economic recession or even a depression.

It’s a high stakes proposition. But it would appear that it’s happening this year, and there is little to stop it. We’ll all find out together.

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