Trumps Steel-Trapped Minds - WSJ Editorial

Donald Trump has ordered a “national security” review of steel imports with a goal of justifying a broad-based tariff. If his advisers look honestly at the evidence, they can’t possibly find enough to justify such a job-killing, economically harmful policy.

Start with the fact that U.S. steel prices are already higher than in the rest of the world, and the gap has significantly widened over the past five years amid increased import duties.. American steel makers cry “dumping,” but is every foreign company in every country dumping? The Commerce Department has already imposed 152 antidumping or countervailing-duty orders on imports from 32 countries, and many more cases are pending. Commerce charged South Korea and Turkey with dumping welded line pipe in 2015 and last year slapped duties on imported cut-to-length steel plate from China, Brazil and Turkey. Antidumping duties contributed to a 25% decline in foreign imports between 2015 and 2016.

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The reality is that foreign competition forced the U.S. steel industry to become more efficient—or at least it did before the tariff walls began going up. Over the past four decades, production has shifted from unionized integrated mills that use blast furnaces and iron ore to lower-cost mini-mills that employ electric arc furnaces, scrap metal and non-unionized labor. Steel from integrated mills makes up a third of domestic production, down from about three-quarters in 1980.

Domestic manufacturers that were slow to adapt like Bethlehem Steel have gone out of business while leaner steel makers that have embraced new technologies are prospering. In April U.S. Steel slashed its annual profit forecast to invest in retrofitting decades-old mills. Improvements in technology and workflow are the main reasons the U.S. steel workforce has shrunk—and survived an onslaught of competition.

Yet U.S. foundries are still running at only 71% capacity while imports make up a quarter of the U.S. market. One reason is that most advances in high-strength steel have occurred overseas. Many downstream consumers say domestic steel doesn’t meet industry quality or safety standards. Mini-mills produce lower-grade metal that’s suitable for roads and buildings, but not as much for automotive sheet or appliances.

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The greatest harm from broad-based steel tariffs would be to the thousands of American businesses and workers that use steel. These would include the higher cost of American steel for construction (42% of steel shipments), automotive (27%) and machinery (9%). Public works and homes would cost more to build.

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The case against steel tariffs is so overwhelming that it’s hard to believe even Mr. Ross can find a way to justify it. The motivation could only be to assist the politically clamorous owners of a handful of steel companies that would exploit government favoritism to raise prices. The losers would be millions of the so-called forgotten men and women the President vowed to help during his campaign.

https://www.wsj.com/articles/trumps-steel-trapped-minds-1497215549