Trump might be close to escalating a trade fight with China

The Trump administration is weighing stiff new limits and tariffs on steel and aluminum imports — and China, one of the proposal’s main targets, is warning it might want to think twice.

Commerce Secretary Wilbur Ross issued a pair of reports on Friday on a months-long investigation into the national security impacts of steel and aluminum imports to the United States. The measures proposed would cut imports from around the globe in an effort to boost domestic production. China warned the country would take “necessary measures to defend our rights” should President Donald Trump decide to follow Ross’s recommendations. Trump has until April to decide what to do.

“Imports threaten to impair our national security,” Ross told reporters Friday as he released the reports detailing options that he has presented Trump to shield US industries from foreign competition, according to the Wall Street Journal.

The maneuver is the latest attempt of the Trump administration to make good on its America First message — even if economists, analysts, and allies say it might not be the best of ideas.

President Trump in April 2017 ordered an investigation into the national security implications of foreign imports of US steel. Days later, he signed a memorandum for a similar investigation on aluminum. Both are efforts undertaken by the Commerce Department under section 232 of the Trade Expansion Act of 1962, a law has only been used twice ever, most recently in 1981.

The reports have long been anticipated but have taken Ross quite some time to complete.

The reports set specific goals for US steel and aluminum production levels and lay out three ways to get there. For steel, Ross suggested a 24 percent tariff on all steel imports, a 53 percent tariff of 53 percent from 12 countries, or limiting each country to 63 percent of its exports for the US in 2017. For aluminum, he advised a 7.7 percent across-the-board tariff, a 23.6 percent tariff from a handful of countries, or an 86.7 percent quota compared to 2017 exports.

Ross said that the measures would boost US aluminum and steel capacity utilization rates — essentially, how much they produce. But observers said it could have a number of unintended consequences, including driving up prices for companies that use a lot of aluminum or steel, such as the auto industry, and unintentionally harm US allies, such as Canada, Brazil, and South Korea, which import steel to the US as well. They also say they could set off a trade war.

Earlier in the week, before the reports were released, Trump referenced them in a trade meeting and the aluminum and steel industries are being “decimated by dumping from many countries, in particular one but many countries.” The “particular one” is China.

Trump railed against China on the campaign trail but has done little in the way of taking firm action against the country since his election. But the ground may be shifting. In January, the US Trade Representative, the agency that oversees US trade policy, announced that the country is imposing 30 percent tariffs on imported solar panels.

Most solar panels in the US come from China. When the tariffs were announced, US Trade Rep. Robert Lighthizer accused China of unfair trade practices, such as using large government subsidies to boost the production of panels and give China a leg up over international competitors.

Friday’s reports, depending on whether Trump acts on them, are another swipe at China — and the Chinese are well aware. Wang Hejun, chief of the trade remedy and investigation bureau of China’s Ministry of Commerce, said in a statement that China reserves the right to retaliate if the proposed steel and aluminum tariffs are imposed. “If the final decision impacts China’s interests, China will certainly take necessary measures to protect its own rights,” Wang said.

President Trump has been talking about China and the steel industry for quite some time and obviously wants this. So do many American steel and aluminum companies and some of Trump’s trade hawk advisers. But there are also plenty of people who think these tariffs might be a very bad idea.

According to Axios, Treasury Secretary Steven Mnuchin, National Economic Council Director Gary Cohn, Secretary of State Rex Tillerson, and Defense Secretary James Mattis have all been fighting against steel and aluminum tariffs.

Several former chairs of the president’s Council of Economic Advisers, including former Federal Reserve Chair Ben Bernanke and Alan Greenspan, sent a letter in July urging the president against steel tariffs, warning that they would damage the US economy. They pointed to President George W. Bush’s tariffs on steel imports in 2002, which were rescinded after fewer than two years when the World Trade Organization came out against them. While they were in place, they resulted in the loss of thousands of US jobs.

Phil Levy, a trade expert at the Chicago Council on Global Affairs and former Bush administration economist, told CNN Money that the Commerce Department’s steel and aluminum tariffs are “raw protectionism in search of an excuse” and that the national security excuse is a sort of Pandora’s Box on trade protectionism. “You now open up the door for anybody to do anything as long as they say ‘national security,’” he said. “That could open the door for a global trade war.”

At Tuesday’s trade meeting, almost all of the Republican members of Congress in attendance urged Trump against taking dramatic action.

Trump has a couple more months before he has to decide what to do with Ross’s recommendations, and it’s not yet clear what he’ll do. In July of last year Ross told Bloomberg he thinks the president will act fast. “The president being the president, I don’t think he’ll dilly-dally,” he said.