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Tariffs: The administration’s side of the story

Trump has imposed tariffs on steel and aluminum shipments of export cargo and import cargo in international trade.

Tariffs: The administration’s side of the story

Last year, the United States Department of Commerce initiated investigations to determine whether imports of steel and aluminum threaten to impair the United States’ national security. After several months studying the impact of imports on the steel and aluminum industries, it was clear that their future was at risk. We concluded that, to preserve America’s ability to produce the metals required to ensure our national security, action was needed.

President Donald J. Trump agreed with the need for action and, on March 8, announced a 25 percent tariff on steel imports and a 10 percent tariff on aluminum.

These tariffs were imposed in light of evidence that record levels of steel and aluminum imports caused by massive levels of foreign excess production capacity threaten to impair our national security as defined in Section 232 of the Trade Expansion Act of 1962 and that steel and aluminum are required for use in 16 critical infrastructure sectors in the United States.

To supply the United States military with advanced metals and US industry with the steel and aluminum needed for critical infrastructure, the American manufacturers providing them must be commercially viable. These companies cannot stay in business only as military and critical infrastructure contractors; the mills and smelters cannot continue to operate at reduced capacity and survive.

Since release of the Section 232 Investigation reports in February, revitalization of the US steel and aluminum industries has begun. Domestic producers have announced nine major investments in recently shuttered plants. US aluminum companies are modernizing and restarting production lines in Hawesville, Kentucky, and Marston, Missouri.

United States Steel Corp. initially decided to restart one of two mothballed furnaces at its Granite City Works in Illinois and announced on June 5 that it is restarting the second one to produce a total of 2.5 million tons of steel. Combined, these two lines will put 800 Americans back to work making essential metals that we need not only for the United States military, but also to rebuild the country’s infrastructure.

Other recent investments and restarts in steel production include plants in Lorain, Ohio; Georgetown, South Carolina; Durant, Oklahoma; Mingo Junction, Ohio; Frostproof, Florida; and Brownsville, Texas.

One thing is clear: The remarkable revitalization of American’s metal industries would not be happening without President Trump’s Section 232 tariffs.

The US steel industry last year produced only 82 million metric tons of crude steel. America’s steel output last year was one-tenth of the 832 million tons of steel produced by China, less than half of the 168 million tons produced by the European Union, and 20 million tons less than India. This illustrates that, by far, China has been the root source of global excess capacity.

Yet, US imports of steel have been skyrocketing, accounting for 32.6 percent of the US market last year. Much of the industry has been operating in the red since 2009, and the lack of profitability and revenues caused by surging imports of subsidized steel have drained the sector of its ability to make investments in new production technologies, R&D and workforce development.

The US producers of aluminum are in even worse shape and this industry has suffered a virtual collapse. In 2017, there were only three remaining companies running five smelters in the United States, down from 23 smelters in 2000.

US aluminum production in 2017 was only 740,000 tons, compared to US consumption of almost 6 million tons. The United States imported nearly 90 percent of its aluminum last year. Like steel, aluminum is used in thousands of products from electrical cable to jet aircraft, and is vital to our national security.

Despite objections over the Section 232 tariffs from foreign producers and governments, the tariffs are on track to accomplish what they were intended to do. They are helping re-establish two vital industries for our national security.

We cannot allow China’s exportation of its domestic employment concerns to threaten industries critical to US national security. We have asked our friends and trading partners to help us rein in this overcapacity. This is hard work, but it must be done for the sake of our national security, and for the sake of the global economy. America is again willing to take the lead.

Wilbur Ross is the US Secretary of Commerce.

Trump imposed tariffs on shipments of export cargo and import cargo in international trade.

Why We Imposed the Metal Tariffs

President Trump announced Thursday that he is imposing tariffs of 25 percent on steel imports and 10 percent on aluminum imports, with exemptions for Canada and Mexico. The president acted because steel and aluminum imports have helped erode the domestic industry to the point that it threatens national security. Unfair trading practices from countries like China have distorted the global steel and aluminum markets. It is time to halt the damage.

Since 1998, countless steel mills and aluminum smelters have closed. More than 75,000 steel jobs alone have disappeared. Today the US has only one steel mill that can produce the advanced alloys used in armored-vehicle plating; one aluminum smelter that makes the high-grade aluminum needed for defense aerospace applications; and one steel mill that makes the materials needed for infrastructure like electrical transformers.

These tariffs aim to reverse this sorry state of affairs. Companies that produce steel and aluminum have said these tariffs will allow them to reopen mills, expand operations, attract new workers, and maintain critical steel- and aluminum-making skills.

It is true that higher steel and aluminum costs could mean price increases for American consumers. But they should be small for individuals and families. Monthly payments for a typical mass-market car might increase by $4 because of the tariff, according to Commerce Department estimates. Is that a fair price to pay for protecting national security? We think so.

Will it start a trade war? It shouldn’t. The US isn’t the only country that has expressed concern about the types of unfair trade practices that are prevalent in the steel and aluminum industries. Countries like China have provided massive subsidies to their companies, and this is harming markets worldwide.

The US has tried to work with others to address these problems. Unfortunately, mechanisms like the Global Steel Forum have fallen woefully short of their aims, with other countries failing to adhere to even basic transparency commitments.

The president will not stand idle while unfair practices erode America’s steel and aluminum industries and threaten national security. Other countries understand that.

Further escalating this issue is counterproductive. Rather, countries should take responsibility for their unfair practices and work together to address the underlying problems facing these industries. The US is ready and willing to engage in such efforts.

The president has the authority to adjust or exempt countries from these tariffs at any time based on circumstances and national security considerations. That is why he is exempting Canada and Mexico. We expect continuing negotiations to create more national-security benefits than the tariffs.

Meanwhile, we will not hesitate to continue standing up for American families, American businesses and American workers.

Wilbur Ross is the United States Secretary of Commerce.

The Commerce Department promotes shipments of export cargo and import cargo in international trade.

Helping the American Economy Grow

I’m excited to present the US Department of Commerce’s 2018–2022 Strategic Plan. It sets out the priorities I’ve established for the department and informs the public about our important work.

The Department of Commerce has one overarching purpose: helping the American economy grow.

American workers and businesses operate in a rapidly changing and increasingly competitive world. To address these challenges, we have developed bold new strategies to accelerate and promote US economic growth and opportunity.

Knowing that innovation is a key driver of economic advancement, we are placing an increased emphasis on the commercial opportunities of space exploration and aquaculture while our scientists are conducting foundational research in areas ranging from artificial intelligence to quantum computing. Our patent professionals are also working to improve the protection of intellectual property so that creators can profit from their inventions.

US businesses must export more, and our workers deserve a level playing field. Enforcing our trade laws to ensure that trade is free, fair, and reciprocal is a top priority of the Department. We are also joining with all federal agencies in cutting red tape that drives up costs and puts American workers and businesses at a disadvantage.

To maintain America’s leadership in next-generation technologies, we are making important advances in data, cybersecurity, and encryption technology. Our economists and statisticians are improving Commerce data that American businesses and communities use to plan investments and identify growth opportunities. Every level of the department will be engaged to ensure that we conduct the most accurate, secure, and technologically-advanced decennial census in history.

Finally, teams across the department are working to keep Americans safe by predicting extreme weather events earlier and more accurately, preventing sensitive technology from getting in the hands of terrorists, rogue regimes, and strategic competitors, and deploying a nationwide public safety broadband network that allows better coordination among first responders.

Thank you to every employee at the department and to our industry and government partners for your dedication to our mission.

Wilbur Ross is the United States Secretary of Commerce.

New NAFTA will govern North American shipments of export cargo and import cargo in international trade.

These NAFTA Rules Are Killing Our Jobs

As the North American Free Trade Agreement negotiations unfold, there is a lot of loose talk being exchanged about automobile parts going back and forth among the United States, Canada and Mexico. NAFTA supporters assert that the US content in cars assembled in Canada and Mexico is particularly high and that therefore our $70 billion-plus trade deficits with our NAFTA partners are not worrisome.

That would be a great argument if it were correct. But it isn’t. That argument is neither true of motor vehicles nor of manufactured goods in general.

A study released Friday by Anne Flatness and Chris Rasmussen of the Office of Trade and Economic Analysis within the Commerce Department proves its falsity. The study, based on Trade in Value Added data recently released by the Organization for Economic Cooperation and Development, shows that between 1995, the year after NAFTA went into effect, and 2011, US content of manufactured goods imported from Canada dropped significantly — from 21 percent to 15 percent. US content in goods imported from Mexico fell even more — from 26 percent to 16 percent. The data is available only until 2011, but there is no reason to think that the situation has improved since then.

The numbers for the automobile industry specifically are similar — not surprising because automobiles account for 27 percent of total imports from Canada and Mexico. Indeed, automobiles drive the US trade deficit with those countries; the United States would enjoy a trade surplus with its NAFTA partners were it not for the trade deficit in autos and auto parts.

These data debunk the claim that US content in the form of parts is so high that we shouldn’t worry about headline gross-deficit figures. Nor is this a trivial concern: Canada and Mexico combined are the largest source of manufactured products imported into the United States, accounting for nearly a quarter of our imports.

This problem is particularly troubling because the previous US share of the content found in imports from Canada and Mexico is largely being absorbed by non-NAFTA trading partners, not by Canada and Mexico themselves. The share of content from foreign countries other than Canada and Mexico has almost doubled in our imports from Mexico, from 14 percent to 27 percent. The non-NAFTA content of our imports from Canada likewise rose, from 12 percent to 21 percent.

We cannot forget that the point of a free-trade agreement is to advantage those within the agreement — not to help outsiders. Instead, NAFTA has provided entry into a bigger market for outside countries, and the United States is paying the price. While NAFTA has achieved its goal of increasing three-way trade in absolute terms, American workers and businesses are not benefiting in a way that is fair and reciprocal.

What does this mean for US jobs?

Hundreds of thousands of Americans go to work every day in the automobile manufacturing industry. The declining US share of content in imports from Canada and Mexico puts those jobs at risk. The United States accounts for an overwhelming share of the total NAFTA auto market today — 83 percent, in fact — yet American workers are not reaping the benefits of that purchasing power.

So, why is this happening?

NAFTA included “rules of origin” provisions that were intended to restrict the non-NAFTA content in final goods. Yet the numbers above show that the opposite has, in fact, happened.

Unfortunately, NAFTA rules of origin on automobiles listed the exact parts to which the rules of origin applied, and many of those parts are no longer used. Another reason is that the rules include a concept called substantial transformation, which means that if further processing of a non-NAFTA item is done by a NAFTA partner, the non-NAFTA items are “transformed” and are deemed to have been produced in the United States, Canada or Mexico.

These facts are why US Trade Representative Robert E. Lighthizer announced that two major objectives for NAFTA are raising the total NAFTA content requirement and raising the US share of that requirement, especially in autos and auto parts.

Autos and auto parts are particularly important because our combined trade deficit in autos and auto parts from Canada and Mexico is $84.6 billion annually, which is the vast majority of our total trade in goods deficit with our neighbors. Only $14.6 billion of that deficit is offset by surpluses in other product categories. That is why we have a NAFTA net trade deficit in goods of $70 billion.

If we don’t fix the rules of origin, negotiations on the rest of the agreement will fail to meaningfully shift the trade imbalance. Our nation’s ballooning trade deficit has gutted American manufacturing, killed jobs and sapped our wealth. That is going to change under President Trump, and rules of origin are just the beginning.

Wilbur Ross is secretary of commerce.