Quite the uproar was created recently with the announcement by the current occupant of the Oval Office of his intention to impose an across-the-board 25 percent tariff on imported steel and a 10 percent tariff on imported aluminum. His stated target is China for “dumping” steel on the U.S. market.
“Dumping” is actually a formal term and refers to a product being “dumped” on a foreign market by selling it at less than fair market value as a means of cornering the market in that foreign country. The price of the product in the importing country is far less than the price of the same product being sold domestically, in this case, China.
Back in the 1980s, the threat to our domestic steel industry was Japan. Trump, in his wisdom, is claiming that China is currently dumping steel on the U.S. market and his across-the-board tariffs are intended to address that unfair practice. Problem is that China currently accounts for only about two percent of our imported steel, so the across-the-board action is actually hurting allies such as Canada, which accounts for almost 50 percent of our imported steel.
A few months back, Commerce Secretary Wilbur Ross discussed imposing anti-dumping duties on Canada for its exports to the United States of softwood lumber. Anti-dumping duties are targeted to a specific country to counter the effect of the less than fair market value pricing. It seems baffling that if Chinese steel exports were the true culprit, then imposition of anti-dumping duties should have been the preferred course of action, if applicable.
Imposing or raising tariffs on imported products are designed to protect a specific industry. The United States Customs Service was created in 1789 to collect tariffs on foreign goods as a means of protecting the fledgling industries of the newly-created nation. In today’s global economy the rules are a bit different.