An investigation has been launched by President Donald Trump into countries that export steel to the U.S., which has raised the prospect of new tariffs on imports.
The investigation is aimed at stopping countries from flooding the U.S. with artificially cheap steel that adversely affect local suppliers.
Although China has often been associated with this practice, President Trump said that the move was about protecting U.S. security and had “nothing to do” with Beijing.
Shares in the U.S. steelmakers rose sharply after the news, and as investors appeared to shrug off the news in Asia, Asian steelmakers also climbed.
Although there had been attempts to shield the national steelmakers from cheap foreign steel through the World Trade Organization, the Trump administration believes that this has had little impact.
The investigation will fall under the U.S. Trade Expansion Act 1962, which lets the president enforce restrictions on imports on the grounds of national security.
President Trump said:
“Steel is critical to both our economy and our military. This is not an area where we can afford to become dependent on foreign countries.”
China is the largest national producer of steel, and there is a huge surplus, which China exports overseas, often at subsidized prices. China is not alone; South Korea and Japan has also been accused of dumping in the past.
U.S. Commerce Secretary, Wilbur Ross while commenting on the probe said that Chinese exports now accounted for 26% of U.S. steel market. He said that despite repeated Chinese claims that they were going to reduce steel capacity, exports had risen.
The administration said in a statement:
“The artificially low prices caused by excess capacity and unfairly-traded imports suppress profits in the American steel industry.”
Mr. Ross said that if the probe found the U.S. steel industry was suffering because of the excess steel imports, he would propose retaliatory steps that could include tariffs.
President Trump, who had been extremely critical of China’s trade practices, had softened his stance of late, as he needs China over North Korea.
Earlier in the month, President Trump said that his administration would not label China as a currency manipulator, backtracking from a key campaign promise.
President Trump has previously accused China of purposely devaluing its Yuan to make its exports more competitive with U.S. goods.
The U.S. steel stocks got stronger as indicated by Dow Jones U.S. Iron and Steel Index, which closed 5% higher on Thursday.
Meanwhile, Asian steel stocks, including Japan’s Nippon Steel, South Korea’s Posco, and China’s Baoshan Iron & Steel Co., also gained slightly.