Steeling for a trade war

The American steel industry is not what it used to be. Once the world’s largest producer, the United States is now No. 4, behind China, which makes half of the world’s steel, Japan and India. Under pressure from imports, which now supply about a quarter of the U.S. market, the U.S. industry has shed 78 per cent of its labour force since the end of the Korean War.

Of the top 10 steel exporters to the United States, half are nations with which the United States has mutual defence agreements. Two of the top five are Canada and Mexico, our partners in the North American Free Trade Agreement; it is not clear how they could legally be hit with tariffs, even on ostensible national-security grounds. As it happens, the American Iron and Steel Institute’s position is that the United States should “strengthen North American steel and manufacturing supply chains.”

China has reduced capacity significantly in recent years. This is in response to China’s economic self-interest, as well as pressure from the United States and Europe, in the form of denying Beijing a coveted upgrade to full market-economy status at the World Trade Organization.

Continuing that more targeted policy from the Obama administration would be smarter than an “America First” approach based on widely applied tariffs . However, Commerce Secretary Wilbur Ross said that a forthcoming study would be aimed not just at China but “a wide range of countries,” which would seem to be a formula for losing friends and influence.