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Steel rods are seen at the Zhong Tian (Zenith) Steel Group Corporation on May 12, 2016 in Changzhou, Jiangsu. (Kevin Frayer/Getty Images)
Steel rods are seen at the Zhong Tian (Zenith) Steel Group Corporation on May 12, 2016 in Changzhou, Jiangsu. (Kevin Frayer/Getty Images)

Trump launches trade probe targeting Chinese steel Add to ...

U.S. 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 U.S. steel makers and national security.

Winning praise from U.S. companies that are constantly fighting with foreign competitors, Mr. 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, Mr. Trump signed a memorandum ordering the U.S. Commerce Department to probe the impact of steel imports on the U.S. defence 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,” said Mr. Trump.

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-based think tank.

U.S. 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 per cent of the U.S. market.

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

He said if the U.S. steel industry is deemed to be suffering from too much imported steel, he will recommend retaliatory steps that could include tariffs. Mr. 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 Steel Dynamics Inc., AK Steel, United States Steel Corp., Nucor Corp., Cliffs Natural Resources Inc. and Allegheny Technologies Inc.

The United States has nearly 100 plants that make millions of tons of steel annually. The U.S. government attempts to shield them from cheap foreign steel chiefly by filing anti-dumping actions with the World Trade Organization, but the Trump administration said these have had little impact.

“The artificially low prices caused by excess capacity and unfairly traded imports suppress profits in the American steel industry,” the administration said in a statement.

The U.S. Defence Department’s annual steel requirements comprise less than 0.3 per cent of the industry’s output by weight.

“There is no doubt that steel plays a role in our national security and the manufacturing of U.S. weapons systems,” said Jeff Bialos, a partner at law firm Eversheds Sutherland, who has worked on steel trade cases in the past.

“But the Department of Defence only consumes a small portion of domestic steel output, and this has decreased over the past decade as composites technology has advanced,” Mr. Bialos said.

One of the military’s largest consumers of steel are U.S. Navy ship builders Huntington Ingalls Industries and Lockheed Martin Corp.

Mr. 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.

“Talking about it as a national-security issue – I don’t think it’s necessary and I don’t think it’s justified,” he said.

In October, 2001, a Commerce Department investigation found “no probative evidence” that imports of iron ore and semi-finished steel threaten to impair U.S. national security.

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

The move is another step in Mr. Trump’s “America First” policies in which he has tried to boost U.S. manufacturers and preserve domestic jobs. Mr. Trump won many votes in industrial Midwestern states such as Michigan and Pennsylvania with a pledge to boost manufacturing and crack down on Chinese trade practices.

Democrats were cautious about Mr. Trump’s step.

“While today’s executive order to investigate potential national-security vulnerabilities due to steel imports is a step forward, I will hold the administration accountable on its promises to fight for working Americans,” Connecticut Congresswoman Rosa DeLauro said in a statement.

U.S. Steel said China and other countries that have exported steel to the United States have cost U.S. manufacturing tens of thousands of jobs.

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