CPA Calls for Comprehensive Tariff Coverage, Removal of Exemptions to Protect American Industry, Workers, and National Security
WASHINGTON, D.C. — The Coalition for a Prosperous America (CPA) today released a new economic report titled, “Presidential Order to Reinforce Steel/ Aluminum Tariffs is Needed and Justified.” The report provides a comprehensive analysis justifying President Trump’s recent action to implement comprehensive global tariffs of 25% on steel and aluminum imports, including downstream derivative products. The report emphasizes that these tariffs are essential for national security, economic stability, and the revitalization of America’s domestic steel and aluminum industries, which have been severely undermined by global overcapacity and foreign subsidies—especially from China.
CPA’s report demonstrates that previous tariff exemptions and exclusions significantly weakened the effectiveness of the original tariffs imposed in 2018. Despite initial positive impacts on U.S. production and employment, exemptions allowed imports to surge, dramatically reducing tariff effectiveness and harming domestic producers. For example, exemptions reduced the effective steel tariff rate to just 3.6%, causing domestic U.S. steel production to decline nearly 10% from its 2019 peak. Similarly, U.S. aluminum smelters have continued to struggle, underscoring the need to raise aluminum tariffs from 10% to 25%.
The report also highlights that extending tariffs to derivative products is critical. Product exclusions have encouraged foreign producers to rapidly expand downstream processing abroad, evading tariffs and further harming U.S. industry.
“The President’s recent tariff announcement is exactly the bold action we need to secure America’s industrial strength,” said Zach Mottl, Chairman of CPA. “Our report shows conclusively that tariff exemptions have undermined American steel and aluminum producers, costing thousands of jobs and weakening our economic security. It is critical we implement these tariffs comprehensively, including on downstream derivative products, to protect American industry from subsidized foreign imports.”
Additionally, the report underscores the negligible price impact of tariffs. Downstream industries actually experienced economic benefits and job growth following the 2018 tariffs. These industries experienced minimal price, highlighting that tariffs effectively supported domestic producers without negative consequences for consumers.
“The evidence is clear—tariffs work,” said Jon Toomey, President of CPA. “Not only did earlier Section 232 tariffs initially boost American steel and aluminum manufacturing, but they did so without significantly raising consumer prices. President Trump’s latest action to remove exemptions, increase tariff rates, and expand tariffs to cover derivative products will further strengthen America’s economy, protect our national security, and rebuild critical supply chains.”
KEY FINDINGS:
- Tariffs are Necessary and Justified
- Reinforcing Section 232 steel and aluminum tariffs is critical to national security and economic stability.
- Eliminating exemptions and extending tariffs to derivative products will significantly benefit domestic industries.
- Steel Industry
- Initial 2018 tariffs boosted production, investment, and employment.
- Country and product exemptions dramatically weakened the tariffs’ effectiveness, resulting in an effective steel tariff rate dropping to just 3.6%.
- Domestic steel production fell by 9.5% from its peak in 2019 due to these exemptions, highlighting the necessity of the newly announced comprehensive tariff coverage.
- Aluminum Industry
- The initial 10% aluminum tariff in 2018 was insufficient; a 25% tariff is needed to rebuild an industry reduced from over 20 smelters in 2000 to only four today.
- Exemptions allowed imports to surge, severely undermining U.S. aluminum smelting capacity and utilization rates, and necessitating stronger tariff measures on aluminum and derivatives.
- Exemptions Severely Harmed Domestic Industries
- Country exemptions granted to major exporters (Canada, Mexico, EU) significantly weakened tariff effectiveness and allowed imports to surge.
- Steel and aluminum are fungible commodities, so any exemption shifts global oversupply to U.S. markets, directly harming domestic producers.
- Product Exclusions Have Led to Increased Imports of Derivative Products
- Product-specific exclusions created incentives for foreign producers to rapidly invest in downstream processing overseas to circumvent tariffs.
- Extending tariffs to downstream steel and aluminum derivative products is essential to protect the entire U.S. manufacturing supply chain.
- China’s Overcapacity Driving Global Crisis
- China accounts for approximately 50% of global steel and aluminum production, with significant subsidies exacerbating global oversupply and driving down prices.
- Tariffs provide critical protection against subsidized Chinese imports and derivative products, which threaten U.S. industrial capacity.
- Historical Evidence of National Security Importance
- During WWII, robust domestic steel and aluminum production was crucial for U.S. military and economic security as it still is today.
- Current national security again requires strong domestic production capabilities to respond effectively to global crises.
- Downstream Industries Benefit from Tariffs
- Contrary to popular claims, steel and aluminum-using industries experienced job growth and benefited economically following the implementation of Section 232 tariffs.
- Tariffs had minimal impact on consumer prices, as shown by minimal increases in product costs (e.g., canned beverages).
KEY RECOMMENDATIONS:
- The Section 232 aluminum tariff should be raised immediately to 25%. A 10% tariff is too small to overcome the cost and subsidy advantages of foreign producers.
- All country exemptions should be eliminated. Experience since 2018 has demonstrated that any country exemption leads to an upsurge in imports from the exempted country. It distorts normal global trade flows to favor shipments into the U.S. because the U.S. is the most desirable large market for most foreign producers.
- All product exclusions should be eliminated. Any exclusion for specific steel or aluminum products weakens the impact of the tariffs on the upstream metal production and puts pressure on U.S. producers of the upstream metal and the downstream finished product.
- Section 232 tariffs should be extended to cover downstream derivative products which are largely dependent on steel or aluminum metal. A tariff on the upstream metal is undermined when downstream derivative product markets are lost to foreign producers. Extension of the Section 232 tariffs to derivative products will protect and support the growth of thousands of U.S. producers of such products, along with supporting the growth of the core steel and aluminum industries.
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