Authored by Lawrence Solomon via Financial Post,
Those who see Trump as threatening a free market in steel should see the world as it really is and welcome, rather than berate Trump’s initiative...
President Trump’s decision to apply steep tariffs to steel imports on grounds of national security met with a loud chorus of protests at home and abroad, by many trying to divine what could possibly be going through Trump’s mind. Trump is an economic illiterate, he’s a protectionist, some reasoned; he’s targeting Canada to get concessions on NAFTA, he’s playing to his base, others pronounced.
These explanations miss the mark. Though Trump doubtless sees taunting Canada on NAFTA and playing to his political base as furthering his agenda, these are but freebies, sideshows to the main event. Trump is acting sincerely, and legitimately, in the national security interests of the United States. Canada isn’t his target; China is.
Trump is old enough to know that during the Korean War, president Harry Truman seized the U.S. steel industry to maintain production for America’s then-vulnerable wartime economy. During the Second World War, when the U.S. dominated the world’s steel production, rationing was nevertheless needed - the public was even exhorted to donate their automobile bumpers to the war effort as scrap steel.
Today, the U.S. has not only lost much of its steel capacity, it’s at risk of losing the balance, making it dependent on a host of countries: Canada, its largest and most reliable foreign supplier, meets just five per cent of U.S. needs. According to the U.S. Commerce Department, the United States is now at risk of finding itself “in a position where it is unable to be certain it could meet demands for national defense and critical industries in a national emergency.” If dependent on a foreign country, the department warns, the U.S. would not have the legal authority to commandeer supplies as it could within the U.S.
“Our steel industry is in bad shape,” Trump tweeted. “IF YOU DON’T HAVE STEEL, YOU DON’T HAVE A COUNTRY!”
Those who believe war is for the history books, never to inconvenience us in our daily comforts, naturally view Trump as some kind of madman, senselessly protecting a few steelworkers in an economically irrelevant industry at a great cost to the rest of the labour force and economy. But those with a longer time frame and a sense of history — and especially those who can sense the gathering storm of war — make different calculations.
Trump, like president Ronald Reagan before him, believes in peace through strength. He wants a military so dominant, and an economy so robust, that no adversary would ever dare challenge it. At the same time, Trump wants to take on today’s Evil Empire, the country that represents a future existential threat to the U.S. — China. An uncompromising ally in this project to neuter China — a man Trump calls a visionary — is Peter Navarro, his chief trade adviser, formerly a professor of economic and public policy at University of California and the author of Death by China, a 2011 book that warns, “China’s perverse form of capitalism combines illegal mercantilist and protectionist weapons to pick off American industries, job by job. China’s emboldened military is racing towards head-on confrontation with the U.S.” Navarro’s other China book, The Coming China Wars published in 2006, described China as a ruthless emerging power likely to succeed in its ambitions of dominance.
The Trump-Navarro policy of confronting China through tariffs on grounds of national security is not a cynical excuse to justify protectionism. It reflects profound alarm over America’s preparedness in confronting a China that through government subsidies has acquired a stranglehold over the global steel industry: China now accounts for half of the world’s entire steel production. Without countering foreign steel subsidies in general and those from China in particular, the U.S. steel industry will be unable to survive.
The world’s steel exporters will doubtless challenge Trump’s claim that he’s acting in the interest of national security before the WTO. They will need to wait in line: The U.S. currently has 169 antidumping and countervailing duty orders in place on steel, 29 of them against China, along with 25 ongoing investigations. And the world’s steel exporters should also be prepared to lose. Under WTO rules, national security is a valid ground for levying tariffs and both the U.S. Commerce Department and the U.S. Department of Defence agree that national security is at stake.
Those who see Trump as threatening a free market in steel should see the world as it really is and welcome, rather than berate Trump’s initiative. He is now the world’s best hope — perhaps only hope — for bringing a semblance of free-market discipline to the global steel industry.