Source: Blog – Alliance for American Manufacturing
Steel workers adjusting position of brake press formed steel with crane Getty Images; photo by Thomas Barwick
Shifting trade patterns have obscured trade cheating.
The Trump administration’s across-the-board 25% tariffs on steel, steel derivative products, and aluminum imports went into effect on Wednesday. The move restores and expands the metals tariffs President Donald Trump imposed in 2018 following a Section 232 investigation that found that the influx of steel and aluminum imports threatened national security.
“We support strengthening the steel and aluminum tariffs to ensure their efficacy in boosting capacity utilization and incentivizing companies to increase their output, make new investments, and hire workers,” Alliance for American Manufacturing President Scott Paul said. “Including steel derivatives makes a lot of sense. This addition will ensure that importers can’t game the system and American companies that make these products have a level playing field.”
Though, over time, the metals tariffs during Trump’s first term were undermined by product exclusions that brought the volume of exports covered by tariffs to well under 50% during most months, they were effective in stabilizing the American steel and aluminum industries. Following their initial imposition, U.S. steel capacity utilization rate to above 80%.
However, the heart of the problem is that Chinese steel overcapacity has sabotaged U.S. steel and aluminum producers for decades, and that excess production has only increased in recent years. Beijing has come under fire for this overcapacity and responded with promises to rein it in.
As a recent AAM report states:
After the last global overcapacity crisis, again largely at the feet of its massive steel industry, China embarked on a four-year effort during which it mothballed 700 small steel mills with 140 MT of steel capacity deemed substandard and reduce another 150 MT of capacity from larger firms. Chinese steelmakers still managed production increases. It produced a record 928.26 MT of crude steel in 2018; a world record it has since broken.
In 2024, the Chinese steel industry can produce more than 967 MT annually, according to Global Energy Monitor. Production and exports continue to climb, explains the Organization for Economic Development, and despite capacity cuts Chinese steel manufacturers still benefit from “strong financial and non-financial incentives and subsidies from many levels of governments. Such incentives can act in similar ways as a cost reduction, thereby artificially boosting the price competitiveness of exports.”
The proof is in the pudding. In the 12 months before February 2024, China exported 95 million metric tons of steel, according to Chinese customs data, a sum that is roughly on par with annual U.S. steel consumption. In March, China’s steel exports posted their strongest month since 2016, spurred on by domestic demand that has crashed along with the country’s real estate market.
Beijing has also responded to increased scrutiny of its industrial overcapacity by seeking third-party countries to veil its exports, pursing heavy investment in new steel capacity in Southeast Asia and Africa.
“Shifting trade patterns hint at underhanded tariff evasion,” Paul said. “Keeping steel and aluminum tariffs strong is critical to achieving the industry stability upon which our nation depends.”
The American steel and aluminum industries have seen catastrophic losses in the past, seriously eroding U.S. national security and economic stability. We cannot afford to repeat such a cataclysm again. The Trump administration’s second round of metals tariffs is crucial in ensuring that U.S. mills have a fair shot at competition in the global market.
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