Trump targets cheap Chinese steel in probe, rallying US steel stocks

WASHINGTON: President Donald Trump on Thursday launched a trade probe against China and other exporters of cheap steel into the U.S. market, raising the possibility of new tariffs and sending shares of some U.S. steel makers up over 8 percent.

Citing concerns about national security, Trump made the announcement at a White House ceremony with U.S. steel executives from Nucor Corp , United States Steel Corp and TimkenSteel Corp alongside Commerce Secretary Wilbur Ross, a billionaire businessman who made part of his fortune investing in the steel business.

“Steel is critical to both our economy and our military,” said Trump, a Republican. “This is not an area where we can afford to become dependent on foreign countries.”

Trump won many votes in industrial states like Michigan and Pennsylvania with a pledge to boost manufacturing and crack down on Chinese trade practices.

China is the largest national producer and makes far more steel than it consumes, selling the excess output overseas, often undercutting domestic producers.

The unusual step of launching an investigation comes as Trump is pressuring China to do more to rein in an increasingly belligerent North Korea. When Chinese President Xi Jinping visited Trump in Florida earlier this month, Trump raised the possibility of using trade as a lever to coax China to do more.

“Everything they export is dumping,” said Derek Scissors, Asia economist at the American Enterprise Institute, a Washington think tank.

Ross cast the decision to initiate the probe as a response to Chinese exports of steel into the United States reaching the point where they now account for 26 percent of the U.S. market.

Chinese exports have risen “despite repeated Chinese claims that they were going to reduce their steel capacity,” said Ross, whom The Economist, a business magazine that champions free trade, in 2004 labeled “Mr. Protectionism” for his history of owning businesses protected from foreign competition.

Ross said that if the Commerce inquiry finds the U.S. steel industry is suffering from too much steel imports, he will recommend retaliatory steps that could include tariffs.

Diverging from the Obama administration’s approach to the issue, which relied largely on filing complaints to the World Trade Organization (WTO), Trump ordered a probe under Section 232 of the Trade Expansion Act of 1962, which lets the president impose restrictions on imports for reasons of national security.

In October 2001, a Commerce Department investigation found “no probative evidence” that imports of iron ore and semi-finished steel threaten to impair U.S. national security.

Steel shares had rallied after Trump won the November election amid promises for increased infrastructure spending. On Thursday shares of Steel Dynamics Inc , AK Steel Holding Corp , Cliffs Natural Resources Inc , Allegheny Technologies Inc and other steel makers closed between 4 percent and 8.5 percent higher.

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