(The Center Square) – President Donald Trump’s unilateral tariffs on all steel and aluminum imports expands upon his first-term efforts to “regrow” the industries.
Data from the U.S. Department of Commerce shows the growth he hoped for never came. Instead, U.S. steel exports declined 25% between 2016 and the end of 2019. Analysts argue that unless the administration curbs subsidized oversupply from China, conditions will not improve.
The same concern buoyed former President Joe Biden’s decision to quash a merger between U.S. Steel and Japanese-owned Nippon Steel, citing national security concerns based on China’s alleged market manipulation. In the fall out, both companies have filed lawsuits alleging political pressure from labor unions and the administration itself scuttled the deal.
Trump said earlier this month that Nippon will invest into the iconic American steel producer, rather than own it. Further details have yet to be revealed.
“Every president since George W. Bush — Obama, Trump, Biden, and now Trump again — has tried to tackle the Chinese overcapacity problem, and yet it persists,” the Center For Strategic and International Studies wrote. “Even when the United States imposes significant barriers to direct Chinese imports, we still feel the ripple effects of China’s industrial policy on global market prices”
After assuming office, the Biden administration rescinded many of the tariffs imposed by Trump on European allies, but kept ones aimed at China. Now Trump is doubling down, imposing the same tariffs on Mexico and Canada, the U.S. steel industry’s two largest trading partners.
“The effects of higher steel prices, largely a result of the 2002 Bush steel tariffs, led to a loss of nearly 200,000 jobs in the steel-consuming sector, a loss larger than the total employment in the steel-producing sector at the time,” the Tax Foundation posted on X.
The problem of oversupply induced by aid and subsidy is a familiar tale in other industries – like shrimping.
Ninety-three percent of shrimp eaten in the United States is imported from not shrimpers, but shrimp farms – a useful analogy to the nature of China’s steel industry. These shrimp farms have received hundreds of millions of dollars in aid from international monetary institutions, primarily the World Bank.
With such a great deal of oversupply, producers struggle to compete against supressed prices, especially without aid from the might of the World Bank or the Chinese government.
The problem of Chinese steel is much the same, with one important exception: the U.S. imports almost no Chinese steel.
“The problem is that Chinese steel makes up less than 2% of U.S. imports (due to existing trade barriers), so such tariffs would have little effect,” the center continued. “The presence of Chinese steel in other markets drags down global prices, squeezing U.S. producers despite negligible imports from China itself.”
The real challenge, then, is addressing global oversupply — mostly driven by China — and its indirect effect on U.S. production, which might require different strategies beyond tariffs, such as targeted subsidies, increased investment in domestic production or stronger international trade agreements to regulate that oversupply.
“If the United States wants to meaningfully address China’s steel and aluminum overcapacity, it can’t go it alone. A ‘Fortress America’ approach only isolates the United States while the underlying problem goes unaddressed. Instead, we need a coordinated strategy with allies to counter China’s unfair subsidies and dumping practices,” the center said.
