- The US steel industry is under assault from foreign producers like China.
- China has taken advantage of a US reduction in steel production.
- President Donald Trump must take action to combat China on steel.
Todd Leebow is the President and CEO of Majestic Steel USA, a Cleveland, Ohio-based steel service center and master distributor of steel.
There is a trade war against our domestic steel industry and communities across America are feeling its effects. We aren’t just competing against other companies – we’re competing against other countries. As US Commerce Secretary Wilbur Ross noted, “our steel industry today is under assault from foreign producers that dump and subsidise their exports.” And you don’t need to do much more than glance at recent production data to get the full story.
Bethlehem, Pennsylvania’s 16 million tons/year capacity plant closed. A 3.5 million tons/year steel mill in Sparrows Point, Maryland, collapsed. Right here in Ohio, two facilities responsible for roughly 1 million tons/year in Lorain and Warren came crashing down. Just about an hour outside of Majestic Steel USA’s Cleveland-based headquarters, the one-sided war cost the city of Youngstown alone more than 40,000 manufacturing jobs and $US414 million in personal income.
Our reduction in production paved the path for countries like China to claim America’s mantle as the world’s foremost exporter of steel.
The peak for US steel production came in 1973 at 151 million tons of raw steel. By 2016 – the most recent full year available – domestic production plummeted to 85.6 million tons. Our industry is now roughly half of what it once was following America’s descent from the top steel exporter to the top steel importer.
The trajectory of Chinese production over the course of recent decades, meanwhile, tells a different tale. In 2000, China produced 127,236 metric tons of steel, according to the World Steel Association; by 2016, that number soared to 806,682 metric tons. China’s calculated, strategic plan to grow their steel production has directly benefitted their GDP – which was more than a full five percentage points higher than ours in 2016. Far more than numbers on a spreadsheet or peaks and troughs on a chart, these metrics are felt by America’s middle class. Once great steel-producing towns are being decimated by the illegal dumping of cheap product subsidized by governments overseas.
The efforts of past administrations have proven ineffective as steel imports into our country increased 25 per cent in the first half of 2017 year alone – accounting for the historically high rate of consumption of 28 per cent, according to a Majestic Steel USA analysis. Unfair practices such as the transshipment of below-market steel products through complicit intermediaries – from Colombia to Costa Rica, Saudi Arabia to South Africa – make that record possible. Other intermediaries include Vietnam, Italy, Thailand, Egypt, the UAE, Malaysia, Pakistan, and Taiwan.
As countries like China effectively evade tariffs, the United States can no longer evade its responsibility to our steel industry and the workers it employs. And so, guided by next-generation leadership, we must finally fight back in this trade war. Historic levels of foreign steel consumption must be met with historic efforts to help America reclaim our position in the international steel market. It is important to note that holding foreign producers accountable for the illegal dumping of steel isn’t inherently anti-China – it’s anti-cheating.
Last month, the Department of Commerce took an important step forward in doing just that by combatting the foreign circumvention schemes we’ve seen in Vietnam with appropriate duties. Given the severity of the current situation, however, we shouldn’t fool ourselves into thinking that China won’t further game the system. What’s needed is more than a short-term solution; what’s needed is a strategy.
Exercising the little-known but tremendously consequential Section 232 authority of the Trade Expansion Act of 1962 is an immediate, short-term fix that must be part of our long-term strategy; it would fundamentally unrig the unfair market for our domestic producers. The appropriate tool through which we can finally start enforcing penalties on known bad actors, Section 232 would unlock measures such as quotas and flat, across-the-board tariffs to countervail the cheating that has deprived for so long our steelworkers from the fair shot they deserve.
The consequences of a crumbling domestic steel industry are as wide-ranging as the products it powers. By importing dumped steel and exporting American manufacturing jobs, the United States is embarking on a dangerous game of dominoes that poses a grave threat both to our economic and national security. If our steel is no longer safe in the international trade structure, what sector is? If America no longer produces the steel necessary to defend ourselves, which country will?
Through world wars and economic crises, steel protected our citizens and provided for our workers.
Now, it’s time to sustain that very fabric of our nation. With Section 232, we can sustain our steel.
NOW WATCH: Briefing videos
Business Insider Emails & Alerts
Site highlights each day to your inbox.