Chinese steel dumping into the United States, something that crushes U.S. industry, is taking center stage at the White House and in the national political conversation as President Donald Trump very publicly considers tariffs and quotas on steel and aluminum imports into the United States.
Trump, in a White House discussion with lawmakers from both parties in the House and Senate on Tuesday, highlighted the American steel and aluminum industries—as well as other industries—“where we are taken advantage of by other countries.”
“Last year, I directed the Secretary of Commerce to investigate whether steel and aluminum imports are threatening to impair U.S. national security,” Trump said. “You see what’s happened with our steel and aluminum industries. They are being decimated by dumping from many countries—in particular one, but many countries.”
That “particular one” Trump was referring to is China. Trump said:
They are dumping and destroying our industry and destroying the families of workers and we can’t let that happen. Secretary Ross submitted the result of the investigation to me last month. My administration is now reviewing the reports and considering all options. Part of the options would be tariffs coming in as they dump steel, they pay tariffs—substantial tariffs—and the United States would actually make a lot of money, and probably our steel industry and our aluminum industry would come back into our country. Right now, it’s decimated. It will make a decision and I will make a decision that reflects the best interests of the United States including the need to address over-production in China and other countries. You have countries that are so over-producing and what they’re doing is they’re dumping it on us and you look at what empty steel factories and plants and it’s a very sad thing to look at. I’ve been looking at it for two years as I went around campaigning.
Trump said he looks at it “two ways—I want to keep prices down, but I also want to make sure that we have a steel industry and an aluminum industry, and we do need that for national defense.”
“If we ever have a conflict, we don’t want to be buying the steel from the country that we’re fighting, because somehow that doesn’t work very well,” Trump said.
On a number of fronts, the Chinese are aggressively attempting to undermine, then out-perform and out-maneuver U.S. industries. Steel and aluminum production are two of the most significant U.S. industries where this is happening.
Tom Ridge, the former George W. Bush-era Homeland Security Secretary, wrote in a July 2017 op-ed in The Hill newspaper that the Chinese steel-dumping—something the Russians also do—is a serious threat to national security. Ridge wrote:
Left unchecked, countries like China and Russia will unfairly continue flooding the global steel market, increasing their production without regard for market forces, propping up their steel industries and bolstering their economies. For example, since 2000, China has increased its steel capacity from roughly the same level as that of the United States to over 10 times that of the U.S., roughly 1.2 billion tons this year. These foreign imports are being dumped in the U.S. and world markets at rock-bottom prices. American companies are finding it unsustainable to compete against government-backed steel production. American jobs are being lost and our national security is on the line. We cannot allow this trend to continue.
But the Chinese are not just dumping steel they produce in China into U.S. markets. Now, the Chinese are taking more steps to gain control of the U.S. steel market—by working to take control of and gain influence in struggling U.S. steel companies. In Pennsylvania, for instance, the Chinese have just this past year started efforts to gain significant control over U.S. steel production in the Pittsburgh area.
One particularly egregious example in which the Chinese are attempting to gain a large beachhead into the U.S. steel market is in Pittsburgh, where Allegheny Technologies Incorporated (ATI) announced late last year what it called in a November 2017 press release “an innovative 50-50 joint venture (JV) with an affiliate company of Tsingshan Group,” the world’s “largest stainless steel producer” based in China.
This joint venture would create jobs in Pennsylvania—even though it would be indebted to the Chinese. “Work at Allegheny Technologies Inc.’s new hot rolling and processing facility in Harrison would double under a joint venture the company is forming with a Chinese stainless steel producer,” the Pittsburgh Tribune-Review’s Brian Rittmeyer wrote in November. “ATI also would restart its idled finishing facility in Midland, Beaver County, creating about 100 manufacturing jobs there.”
But the steel would originate from elsewhere in the world—most likely Indonesia.
“Every distributor who buys stainless steel is happy that he’s going to be able to buy from the Midland cold mill, via Brackenridge, via Indonesia,” industry analyst John Tumazos, the CEO of Very Independent Research, said, per the Pittsburgh Tribune-Review’s Rittmeyer. “I don’t think this deal makes value for Allegheny as much as it destroys value for the competitors in Alabama and Kentucky.”
It’s so bad for Kentucky, Breitbart News has learned, that Gov. Matt Bevin wrote a letter to Treasury Secretary Steven Mnuchin asking him to intervene and stop this joint venture via the regulatory review process.
In a previously-not-reported letter from Bevin to Mnuchin sent on Feb. 7, Kentucky’s governor wrote to raise “serious concerns” with the proposed joint venture between the Chinese Tsingshan and the American ATI.
“Because of ATI’s well-known history of cooperation with the U.S. defense industry, and because the proposed joint venture is expected to lead to the erosion of critical U.S. stainless steel manufacturing capability, the joint venture threatens to impair the national security of the United States,” Bevin wrote to Mnuchin. “I urge the Committee on Foreign Investment in the United States, which you Chair, to initiate a review of the joint venture.”
In addition to the national security concerns, Bevin said he was “additionally concerned about the joint venture’s announced intent to target the U.S. market with Tsingshan’s foreign-produced stainless-steel slabs.” Bevin wrote:
If this proposed partnership is consummated, it will undermine the competitive marketplace by impairing the financial health of U.S. manufacturers of stainless steel, raise the potential for reduced output, shutter U.S. operations, and curtail R&D investment. Through this proposed joint venture, a Chinese firm could negatively impact the ability of domestic manufacturers to serve as a reliable source of stainless steel for defense industry applications critical to our national security. There will undoubtedly be a negative impact on critical infrastructure projects and other commercial uses key to the country’s economic security.
Bevin continued by noting that Kentucky-based North American Stainless (NAS) produces “about 35% of all North American-stainless steel” today and since 1990 NAS has invested more than $2.6 billion in Kentucky—and has not laid off workers even during the economic crisis of 2008.
Bevin mentions the efforts by the Trump administration and Mnuchin to intervene in a similar proposed $2.3 billion merger between U.S. aluminum producer Aleris and Chinese firm Zhongwang USA, LLC, last year—which ended up blocking the deal through the Committee on Foreign Investment in the United States (CFIUS).
Under significant scrutiny from CFIUS, Zhongwang backed out of the proposed merger, which would have given China a significant foothold in the U.S. aluminum industry. MetalMiner’s Stuart Burns wrote about that deal when Zhongwang backed out of it under scrutiny from U.S. officials in November:
Some two dozen US lawmakers had urged U.S. Secretary of the Treasury Steven Mnuchin to reject the proposed sale, saying Aleris was involved in the production and testing of specialized alloys used by the defense industry. Considerable opposition was mounted by the Committee on Foreign Investment in the United States (CFIUS), a federal government body that reviews foreign investments in domestic firms, and determines whether those potential investments may impact national security. Lawmakers appealed to the CFIUS, saying Aleris’ research and technology were critical to U.S. economic and national security interests.
Burns continued in his report by noting that Zhongwang had two “factors” working against it: U.S. manufacturers raising significant concerns about Chinese infiltration into the U.S. aluminum industry, and evidence that Zhongwang had a connection to “the stockpiling of thousands of tons of aluminum in Mexico, suspected of either being illegally exported from China under misreported tariff codes, or diverted to Mexico when it became clear they could not be legally imported into the U.S. without incurring anti-dumping duties.”
Trump’s meeting at the White House on Tuesday comes after organized labor in the steel and aluminum workers’ community had begun publicly criticizing the administration for lack of action. Leo Gerard, the president the United Steelworkers union, appeared on CNN in January to rip Trump after some steelworkers unions were initially pleased with Trump, to some degree, at the beginning of the administration in early 2017.
“We’re terribly disappointed and hugely frustrated,” Gerard said in January on CNN. “There’s been no action that has done anything to protect and defend American jobs. … In some cases we’re worse off now than we were then.”
But, now, Trump appears poised to take significant action on the steel and aluminum fronts—though it is unclear as of yet exactly what he might do in terms of tariffs and quotas. At this White House meeting on Tuesday, Trump urged caution on the part of fellow Republicans when it came to discussing the need for some type of action on the tariff and quota front with regard to Chinese steel and aluminum dumping—earning mild praise from populist Democrats in the room.
“What we are talking about is tariffs and or quotas,” President Trump said at the White House Tuesday.
According to the White House press pool reports from the National Journal’s George Condon, in Tuesday’s meeting Republicans like Sens. Roy Blunt (R-MO), Pat Toomey (R-PA) and Mike Lee (R-UT) raised concerns about what they said would be negative impacts from tariffs.
“I would urge us to go very, very cautiously here,” Toomey, a former president of the anti-tariff Club For Growth, said.
“We need to be careful here that we don’t start a reciprocal battle on tariffs,” Blunt said. “We make aluminum and we make steel in Missouri, but we buy a lot of aluminum and we buy a lot of steel as well.”
Sen. Lee, meanwhile, warned about potential negative impacts on jobs from tariffs or quotas.
Trump, however, was undeterred. He told Lee, per the pool reports, that tariffs and quotas would help rebuild the U.S. steel and aluminum industries, which Trump said “will create a lot of jobs.” Trump said that prices likely would not rise either, since foreign competitors to U.S. companies, he argued, would “eat a lot of the tax.”
“A lot of companies will eat it,” Trump said of the cost of potential tariffs before adding that the U.S. has “rebuilt China” with weak trade policies.
“We’re like the piggybank that had people running it who didn’t know what they are doing,” Trump said of how China and other countries take advantage of the United States, noting that the U.S. provides defense for Saudi Arabia and South Korea without reimbursement–something he said is “really unfair.”
The person who appeared most pleased in the room was Sen. Sherrod Brown (D-OH), a populist Democrat running for reelection this year in Ohio—a state in which Trump crushed Democrat Hillary Rodham Clinton in the 2016 presidential election.
“Sen. Sherrod Brown praised Trump’s policies on trade, particularly on NAFTA, He said he wants to work with the administration,” Condon of the National Journal wrote in the pool report.
Brown himself noted he works with GOP Sen. Rob Portman (R-OH), his fellow Ohioan, saying: “Trade has always been bipartisan.”
“We can work on NAFTA together,” Sen. Brown said.
It remains to be seen, again, what exactly Trump will do on China, but it definitely appears as though his instincts are to ramp up economic pressure on the Chinese efforts to infiltrate U.S. industries. Trump has already imposed tariffs on Chinese imports of solar panels, a narrower industry-specific action. If Trump moves forward on this front, he will be fundamentally changing the way the Republican Party handles the issue of trade policy—and the issue of China.