The Buzz

Why Does Trump Think Imported Steel Threatens U.S. National Security?

Last month, President Donald Trump promulgated a memorandum on “Steel Imports and Threats to National Security,” directing Commerce Secretary Wilbur Ross to consider whether “steel is being imported into the United States in such quantities or under such circumstances as to threaten to impair the national security.” Prices are too low, he wrote, because the world is awash in excess capacity. The memo notes that Ross has already initiated an investigation under Section 232 of the Trade Expansion Act of 1962 (19 U.S.C. 1862). If he finds a problem, he may recommend “steps that should be taken to adjust steel imports so that they will not threaten to impair the national security.” Governments mostly “adjust” trade with inefficient and unexpected results, so before taking “steps,” we should ask three questions. When have steel imports been problematic to national security in the past? Is the situation presently getting worse? And what circumstances might exacerbate the presumed problem in the future?

Past. Consider the most recent stressing case: the sudden need for thousands of new armored vehicles during the Iraq War. Armoring trucks and Humvees, and building Mine-Resistant Ambush-Protected Vehicles (MRAPs), required much more armor-grade steel than the US Army and Marine Corps might buy in any given year. In my recent dissertation on the MRAP program (p. 169), I observed that “no bottleneck was as threatening as that of steel plate” in this production. Each of the thousands of MRAPs built required four tons of steel plate that industry just wasn’t producing. Back in 2006,

    Only two domestic suppliers were certified by the Defense Department to supply the 3/8-inch armor plate used in MRAP construction: International Steel Group and Oregon Steel Mills. [721] Only the former was actually in operation at the start of the war. Its production was 35,000 tons annually in 2004, and had been only 6,500 tons annually in 2003. The DoD would suddenly be demanding 21,000 monthly. [722] Interestingly, International was owned by Arcelor Mittal, the world’s largest steelmaker; while headquartered in the Netherlands, its chairman and largest shareholder was Indian steel magnate Lakshmi Mittal. More interestingly, Oregon Steel Mills was owned by the Evraz Group; while its shares are traded on the London Stock Exchange, the company itself was headquartered in Luxembourg City and Moscow, and was the largest steel producer in Russia. [p. 169]

Getting attention from American industry for this sort of build-up should have been difficult. Under the Defense Production Act of 1950—a statute which grants the executive breathtaking economic authority in an emergency—the president may demand preferential treatment from any supplier based in the United States. The most comprehensive authority is delegated only to the Secretary of Defense, who can assign any program a “DX” rating, sending its military orders to the head of the line. The most recent revision of the the DX list (1 March 2016) includes just nine programs, mostly related to nuclear weapons: Air Force One, the presidential helicopters, B-2 bombers, Minuteman and Trident nuclear missiles, the ballistic missile defense system, the SBIRS launch-warning satellites, the Program 390 reconnaissance satellites, and the mysterious Naval Program 341. In June 2007, Secretary Gates accorded the MRAP a DX rating, indicating that he really wanted to win that war. So did some unusual suspects:

    Those foreign-owned firms absolutely supported the war effort. Mittal USA spokesman David Allen told National Defense that “DX ratings are nothing new. We’ve seen them on-and-off since 1980. We would respond to any DX rating as we have in the past.” [723] More so, SvenskaStål AB (SSAB), a Swedish specialty steel manufacturer well-known for armor plate, had already supplied two MRAP producers, including Force Protection. SSAB had other priorities too, including supplying steel for the booming business of erecting cellular telephone towers in China. Potential supply shortages through its mills in Sweden were eventually addressed by intergovernmental discussions. Force Dynamics diversified its sources of steel for components other-than-armor in 2007, adding Canada’s Algoma Steel to Mittal as a second supplier on the Cougar program. [724] That year, though, Algoma was purchased by India’s Essar Group, and retitled Essar Steel Algoma. In a globalizing economy, there was simply no wholly American, or even North American, solution to the industrial problem. [pp. 169–170]

I should be clear that long-standing American defense contractors were responding. They needed steel plate to up-armor all those soft-skinned trucks, but they sometimes endured a roundabout process to get it: