Republicans Challenge Trump on Steel and Aluminum Tariffs

(Bloomberg) -- Republican lawmakers cautioned President Donald Trump in a White House meeting against levying tariffs on steel and aluminum imports, warning that it would raise prices of the metals and potentially cost the U.S. jobs in other industries including car manufacturing.

“Part of the options would be tariffs,” Trump said at the beginning of the meeting with members of Congress from both parties. “I want to keep prices down but I want to make sure that we have a steel industry.”

Reporters were allowed to observe nearly an hour of the meeting, in which lawmakers in Trump’s own party openly challenged his positions on trade.

Trump’s meeting with the four Democrats and 15 Republicans led off with discussion of his administration’s investigation of steel and aluminum imports. Commerce Secretary Wilbur Ross submitted his department’s final reports on the metals to Trump in January, and the president has until mid-April to decide on any potential action, which could include tariffs.

Trump said that “many countries” including China are “dumping” imports of the metals on the U.S. market, hurting domestic production.

The president instructed the Commerce Department last year to probe whether imports of steel and aluminum represent a threat to U.S. national security, under the seldom-used Section 232 of the Trade Expansion Act of 1962. The investigations are seen to primarily target China, which the U.S. blames for creating excess capacity and dragging down global prices. A separate U.S. probe into China’s intellectual property practices is also clouding trade relations.

“232 is a little like old-fashioned chemotherapy,” House Ways and Means Chairman Kevin Brady, a Texas Republican, told Trump. “It isn’t used as much because it can often do as much damage as good.”

Republican Warnings

Republicans in the meeting repeatedly cautioned Trump against enacting tariffs and more broadly challenged his assertions on trade.

“Invoking national security when I think it’s really hard to make that case invites retaliation,” Senator Pat Toomey, a Pennsylvania Republican, told Trump.

Senator Mike Lee, a Utah Republican, added: “You would end up with net job losses,” noting U.S. industrial dependence on steel. He said only 3 percent of domestically produced steel is needed for national-security purposes, potentially undermining Trump’s argument.

Trump responded that the number would go up as the U.S. increases defense spending in coming years.

Senator Lamar Alexander, a Tennessee Republican, said that former President George W. Bush’s 2002 steel tariffs raised the price of the metal across industries and caused automakers to leave the country, costing U.S. jobs. General Motors Co., Nissan Motor Co. and Volkswagen AG all have motor vehicle assembly plants in Tennessee and suppliers elsewhere in the state.

“Lamar, it didn’t work for Bush,” Trump responded. “But nothing worked for Bush.”

After Trump complained about Canadian trade practices with regard to lumber, timber and “Wisconsin and our farmers,” Senator Ron Johnson, a Wisconsin Republican, chimed in.

“Trade works very well for Wisconsin,” he said. “I agree with the concerns you have expressed, as well as the concerns of Senator Toomey and Senator Lee.”

He added that it “makes no sense” to try to draw “high-labor content manufacturing” back to the U.S. “We need to do the value-added things,” he said.

“Proceed with real caution,” he told Trump, pointing to “overcapacity” in Chinese manufacturing as “the root cause of the problem.”

Senator Rob Portman, an Ohio Republican who attended the meeting and is a former U.S. Trade Representative, said afterward that he had recommended Trump take a “scalpel” approach to steel imports, penalizing only certain products such as electrical steel. Broader tariffs would hurt the economy and are more likely to invite retaliation, he said.

He also criticized Trump for signaling he would act on steel and aluminum without taking action. That’s contributed to a 15 percent increase in steel imports in the last year, Portman said, and a doubling of imports of some categories including electrical steel.

“Once you decide you’re going to do it, other countries decide to send their stuff in under the wire,” he said.

Representatives Rick Crawford of Arkansas and Mike Bost of Illinois, both Republicans, signaled support for Trump’s approach during the meeting, as did Senator Gary Peters, a Democrat from Michigan.

"I am extremely concerned by unfair practices like dumping that undercut American-made goods and products across a number of industries and undermine our competitiveness in the global marketplace, and we must address these issues in a comprehensive way," Peters said in a statement.

"Steel dumping poses a particularly damaging threat to our national security, hurting domestic producers and weakening a key part of our national defense supply chain," Peters added.

‘Reciprocal Tax’

Senator Ron Wyden, an Oregon Democrat at the meeting, said afterward that Trump “seems to understand the enforcement challenge.”

“The biggest question outstanding, of course, is 232 and what kind of tools he finally decides to pursue as the president with respect to America’s position in global markets,” he said.

Trump has frequently accused China of unfair trading practices, and he recently told Chinese President Xi Jinping that the U.S. trade deficit with China is “unsustainable.” The prospect of Trump turning tough trade rhetoric into action increased last month after he slapped tariffs on solar panels and washing machines, in his first major punitive trade action since taking office.

Trump said on Monday that he would soon announce a “reciprocal tax” -- a tax on imports from other countries at the same rates those countries impose on U.S. products.

“So we’re going to be doing very much a reciprocal tax,” Trump said. “And you’ll be hearing about that during the week and during the coming months.”

But an administration official said later on Monday that there isn’t a proposal for a reciprocal tax in the works.

Trump nonetheless mentioned it again in Tuesday’s meeting.

“I think we should have a reciprocal tax. That’s called fair trade,” Trump said. He added that “we’re like the stupid people” if the U.S. continues to pay tariffs imposed by other countries while allowing their products to enter the U.S. with lower duties.

Ultimately, he said that may lower duties for everyone.

“What’s going to happen is either we’ll collect the same that they collect, or probably what happens is they’ll end up not charging a tax and we won’t have a tax, and that becomes free trade,” Trump said.

A House Republican proposal to tax imports, known as the border-adjusted tax, was removed from tax revamp plans after facing intense opposition from import-heavy industries such as retailers, and a cool reception from Senate lawmakers. Ultimately, no such import tax made it into the tax law that passed in December.

©2018 Bloomberg L.P.

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