Trade Cases

Skeptical Senators Grill Ross Over Tariffs, Product Exclusions

Written by Tim Triplett

In testimony before a skeptical and sometimes combative group of senators Wednesday, Commerce Secretary Wilbur Ross did his best to defend the Section 232 tariffs on steel and aluminum and the controversial trade policies of the Trump administration. Despite his assurances that the process of reviewing product exclusion requests is on track, members of the Senate Finance Committee appeared unconvinced.

In response to protests of the tariffs—25 percent on steel and 10 percent on aluminum—Commerce has established a procedure through which manufacturers can request exclusions for products that are not sufficiently available domestically. Ross reported that Commerce has received more than 20,000 exclusion requests for steel products and 2,500 exclusion requests for aluminum products and has posted more than 9,200 for public review and comment.

Announcing the department’s first determinations, Ross told the committee it has acted on just 98 requests for steel products, granting 42 and denying 56. “Review of exclusion requests and related objections is being conducted on a case-by-case basis in a fair and transparent process,” Ross said. “Commerce is making an unprecedented effort to process the requests expeditiously.” 

The 42 exclusion requests that were granted cover seven different companies importing steel products from Japan, Sweden, Belgium, Germany and China. The seven companies receiving the exclusions include:  Schick Manufacturing, Inc., of Shelton, Conn.; Nachi America Inc., of Greenwood, Ind.; Hankev International of Buena Park, Calif.; Zapp Precision Wire of Summerville, S.C.; U.S. Leakless, Inc., of Athens, Ala.; Woodings Industrial Corp. of Mars, Pa.; and PolyVision Corp. of Atlanta, Ga. The department also denied 56 steel exclusion requests from 11 different companies, which were not named in the release.

Sen. Ron Wyden (D-OR) challenged Ross’s claim that the review process is smooth and transparent, pointing to press reports indicating the department has been flooded with waiver requests and does not have the trained manpower to properly review them. “You planned on 6,000 exclusion requests and so far you’ve gotten 21,000. I don’t think you did your homework up front. Nothing I have heard this morning seems like you will be on top of this anytime soon,” Wyden said. “It’s frustrating to watch as the administration’s trade moves seem more like knee-jerk impulses than any kind of carefully thought-out strategy. Its most obvious accomplishment on trade is sowing economic chaos that has united our allies and China against us.”

Defending the tariffs, Ross explained that they are designed to reduce imports of steel and aluminum to levels needed for the domestic industries to achieve long-term viability. Strengthening the U.S. mills will reduce the country’s reliance on foreign producers, he said. While it will take time for the U.S. industry to restart idled capacity, he pointed to several announcements that have already taken place: U.S. Steel is restarting two steel blast furnaces in Granite City, Ill., mill. Republic Steel is restarting an idled steel electric arc furnace in Lorain, Ohio. Liberty Steel is reopening its wire rod coil steel facility in Georgetown, S.C. Magnitude 7 Metals is restarting 236,000 metric tons of aluminum production in Marston, Mo. And Century Aluminum is investing $100 million dollars to restart and modernize its high purity aluminum smelter in Hawesville, Ky. 

Sen. Chuck Grassley (R-IA) asked Ross how long it will be before the restarted plants increase domestic supply enough to lower steel prices. “It should be fairly quick,” Ross said, noting that U.S. Steel is in the process of adding 2.5 million tons of capacity. “By the end of the year that problem will be pretty well addressed.” The tariffs are not solely the reason for the 60 percent spike in steel prices since last year, Ross argued, claiming “antisocial behavior” by speculators is at least partly to blame. “There is no reason for tariffs to increase the price of steel by far more than the tariffs, yet that is what has been happening. We are starting an investigation to find out if there are people illegitimately profiteering on the tariffs.”

Supporting President Trump’s decision to withdraw the exemptions and impose the tariffs on Canada and Mexico, Ross explained that China masks its exports to the United States by shipping them through other countries. “The only way we will solve the global steel overproduction and overcapacity is by getting all the other countries to play ball with us. While they are complaining bitterly about the tariffs, the fact is they are starting to take the kind of action [monitoring the source of imports] which if they had taken sooner would have prevented this crisis,” Ross said. Implying a link between the tariffs and the two countries’ cooperation in the ongoing NAFTA negotiations, Ross added that “232 could go away” once trade talks resume following the upcoming Mexican election.

On May 23, Commerce also initiated an investigation under Section 232 to determine whether imports of automobiles and automotive parts into the United States threaten to impair the domestic industry, and thus national security.  Public hearings on the investigation will be held on July 19 and 20.   

Sen. Orrin Hatch (R-Utah) pointed to various retaliatory tariffs, such as the tariffs on U.S. pork exports to Mexico and China. “I just don’t see how the damage posed on all of these sectors could possibly advance our national security,” he said, arguing that the steel and aluminum tariffs distract from the real trade issue that must be addressed—Chinese mercantilist policies that harm U.S. companies and the U.S. economy. Hatch said he was stunned when he learned that Commerce had initiated the Section 232 investigation on automotive. A 25 percent tariff on automobiles could raise the price of the average imported car by $5,800, erasing roughly 10 percent of the median household income, he said. “Mr. Secretary, as you consider these tariffs, know that you are taxing American families, you are putting American jobs at risk, and you are destroying markets—both foreign and domestic—for American businesses of all types, sorts and sizes,” Hatch said.    

Sen. Pat Toomey (R-PA) was also critical. “It does not seem the administration has taken into account that for every person who works in the steel industry there are 40 working in steel-consuming industries. So, we are picking winners and losers. In my view, we are at risk of far more jobs lost than gained.”

Toomey added: “I wish we would stop invoking national security, because that is not what this is about. This is about economic nationalism.”

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