Rising trade tensions are all the talk these days, stemming from an increasingly complicated web of tariffs, counter-tariffs and World Trade Organization (WTO) disputes, not to mention the ongoing talks surrounding renegotiation of the 24-year-old North American Free Trade Agreement (NAFTA).
On Wednesday, Secretary of Commerce Wilbur Ross testified before the Senate Finance Committee, during which he was grilled by committee members on the Trump administration’s current and proposed trade actions, including Section 232 steel and aluminum tariffs, the recently launched Section 232 automotive probe and the Section 232 exclusion request process. (The Department of Commerce this week announced it would grant 42 exclusion requests and deny 56. The total 98 requests in question represented less than 1% of the more than 20,000 requests received.)
The full video of the Wednesday hearing is available on the Senate Finance Committee website.
“Commerce has received more than 20,000 steel and aluminum exclusion requests (including resubmissions) and has posted more than 9,200 for public review and comment,” Ross said during his opening statement. “Commerce has also received more than 2,300 objections to exclusion requests. Review of exclusion requests and related objections is being conducted on a case-by-case basis in a fair and transparent process.”
In his opening statement, Senate Finance Committee Chairman Orrin Hatch (R-Utah) expressed concerns about the tariffs’ impact on domestic businesses.
“American manufacturers are already suffering the consequences of increased cost and decreased supply of steel and aluminum inputs,” Hatch said. “Take for example, Bish’s Steel Fabrication. Bish’s makes custom industrial equipment in my hometown, Salt Lake City, Utah, and sells to customers in the United States and around the globe. Bish’s has been in business since 1945, but because of the Section 232 tariffs, they are worried about their future. Steel prices are going up. Not just foreign steel subject to tariffs, but also U.S. steel.
“As a consequence, Bish’s has lost its competitive edge against foreign manufacturers and the company tells me that contracts for future work have all but dried up.”
Questions on the 232 Exclusion Process
Hatch also expressed reservations regarding the Section 232 tariff exclusion process.
“It should come as no surprise that many of us on the committee have concerns about the process, effects, and strategy behind these investigations and resulting actions,” he said. “That includes the serious problems that Senator Wyden and I raised in April about the product exclusion process, a process that still needs significant improvement.”
Ranking Member Ron Wyden (D-Oregon) also offered criticism of the process and its efficacy, and requested that Ross provide a specific timetable with specific fixes for the process so that “the small businesses and the workers who are contacting us can really have a sense of what’s going to happen.”
“It’s impossible to commit to a specific timetable when we don’t know how many requests are yet to come in,” Ross said. “That’s one big problem. As you can see, there are still requests coming in.”
Wyden, however, suggested the Department of Commerce was not prepared for the volume of requests that have come in.
Section 232 Auto Probe
On May 23, the Department of Commerce self-initiated a new Section 232 investigation into whether imports of automobiles and automotive parts threaten to impair the country’s national security.
In response to a question from Hatch regarding national security implications, Ross responded that it was still too early in the investigation to identify those factors. He added that as required by the law, he has sent a notification to Secretary of Defense James Mattis to seek his input on the investigation, as was done with the steel and aluminum cases.
In response to a later question from Sen. Chuck Grassley (R-Iowa), Ross added there is no decision yet as to whether to recommend tariffs.
“We are at the early stages of the process,” Ross said. “We have invited the various participants in the industry to make their submissions. They requested some extra time, so we gave them an extra week to do so.”
In his opening statement, Ross argued for a positive effect of the tariffs, that being domestic manufacturers restarting previously idled capacity, listing a number of company announcements (including U.S. Steel’s announcements this year that it will restart two blast furnaces at its Granite City, Illinois plant).
Grassley asked Ross how long it will take for domestic plants to be able to ramp up production enough to bring prices of steel back down. Ross said he couldn’t identify exactly when the production restarts would come to fruition, but that they should happen in most cases by the end of the year.
He added, however, that certain “intermediary parties” withholding inventory from the market has contributed to price increases and that an investigation is being started to determine whether people “illegitimately are profiteering out of the tariffs.”
“So the price of steel and for a while the price of aluminum went up far more than is justified by the tariffs,” Ross said.
The Trump administration’s announcement late last month that it would let temporary exemptions from the Section 232 steel and aluminum tariffs expire for the E.U., Canada and Mexico have led to threats of retaliation from the intended parties and questions from some domestically about the purpose of such tariffs against market-economy trading partners and allies.
Sen. Michael Bennet (D-Colorado) asked Ross about Canada and how its steel industry is considered a threat to national security in the context of Section 232.
“What is the national security rationale for putting a tariff on the Canadian steel industry with whom we have a trade surplus?” Bennet asked.
Ross noted the remedy has to be a global solution, citing efforts by China, for example, to reroute exports through third-party countries in order to avoid tariffs.
“The only way we’re going to solve the global steel overproduction and overcapacity [problem] is by getting all the other countries to play ball with us,” Ross said. “And while they’re complaining bitterly about the tariffs, the fact is they’re starting to take the kind of action, which if they had taken sooner, would have prevented this crisis.”
Sen. Pat Toomey (R-Pennsylvania), however, was not satisfied with Ross’ answer.
“What policy change would the Canadians have to make, what would they have to do so that the administration would stop taxing my constituents on the steel that they buy from Canada?” Toomey asked.
Ross suggested breakdown of talks on NAFTA contributed to the decision to lift the Section 232 exemptions for Canada and Mexico, and that the NAFTA talks could get a second wind on the heels of the July 1 Mexican presidential election.
“Our objective is to have a revitalized NAFTA, a NAFTA that helps America,” Ross said. “As part of that, the 232s would logically go away, both as it related to Canada [and] Mexico.”
Toomey followed up by arguing the proposed sunset clause suggested by the American negotiating team would lead to a “lesser” NAFTA and said the administration’s trade actions are based on “economic nationalism,” not national security considerations.
He also alluded to the recent bill he proposed along with Sen. Bob Corker (R-Tennessee), a bill which calls for giving Congress the authority to block the president’s tariff actions.
“I would urge my colleagues to support the legislation that Sen. Corker and I have, which would restore to Congress the authority to make the final decisions about the imposition of those tariffs.”
Sen. Rob Portman (R-Ohio) said he supported enacting trade remedies in the case of China, but that Section 232 should be used “very carefully and very selectively” and, more specifically, for national security reasons.
“Although the WTO has not yet adjudicated this case, if we’re pushing the envelope beyond national security, I think we lose a tool that could be very important for us in a true national security situation,” he said. “[I’m] deeply concerned about its application to Canada, as an example. … Mexico, the E.U., I don’t see the national security perspective there.”