Commerce Secretary Wilbur Ross said President Donald Trump's plan to slap stiff tariffs on imported steel and aluminum are "no big deal."
Ross said the levies will have a "trivial" effect on prices, using a can of Campbell's Soup to illustrate how Trump’s tariffs will minimally raise the cost of consumer goods.
"In a can of Campbell's Soup, there are about 2.6 pennies worth of steel. So if that goes up by 25 percent, that's about six-tenths of one cent on the price on a can of Campbell's Soup," Ross said on CNBC. "I just bought this can today at a 7-Eleven ... and it priced at a $1.99. Who in the world is going to be too bothered?"
Trump on Thursday said he will approve plans to impose 25 percent duties on steel imports and 10 percent on aluminum even as allies and some advisers objected. Trump justified the tariffs with a little-used Cold War era law that gives presidents the power to cut imports that could threaten “national security.”
The announcement sparked fears of a possible trade war that would impair trade and spur inflation. The Dow Jones Industrial Average dropped as much as 963 points, or 3.8 percent, over two days after Trump pledged to enact the tariffs.
Prior to Ross' comments, Campbell Soup made an announcement that the tariffs would lead to price hikes.
"Any new broad based tariffs on imported tin plate steel – an insufficient amount of which is produced in the U.S. – will result in higher prices on one of the safest and more affordable parts of the food supply," the company said. Its sales fell 2 percent in the second quarter, prolonging a multiyear decline as consumers seek out fresher whole foods at the grocery store.
Guess What – We’re Already in a Trade War
Ross last month argued that steel is important to U.S. national security, and that current imports are hurting the domestic steel industry.
“The present quantities and circumstance of steel imports are 'weakening our internal economy' and threaten to impair the national security as defined in Section 232," the department said on Feb. 16.
"Economic strength is military strength," Ross said on CNBC. “This isn’t the first time we put tariffs on steel. We have tariffs on many forms of steel. The reason why we've had to go this route is they don't solve the problem of overcapacity in global dumping."
Larry Kudlow, the former Reagan administration economist who advised the Trump campaign, on Friday warned that the tariffs are a "blunt instrument" that could have adverse effects on U.S. consumers and companies. As a proponent of free trade, Kudlow said he has disagreed with Trump's arguments for tariffs.
"Across-the-board tariffs like this damage the users of the commodity," Kudlow said on CNBC. "What are you going to do about cars? All manner of transportation, buses, trucks, SUVs? The energy business. Airplanes, they all use steel."
Kudlow said he wants White House chief economic adviser Gary Cohn to remain, responding to multiple media reports about Cohn's future with Trump after he was not able to convince the president not to impose the tariffs.
Too Much Steel
This issue of global steel overcapacity has been on the political agenda for years. In December 2016, the G20 countries launched the“Global Forum on Steel Excess Capacity” to find a multilateral solution.
China’s build-out of steel capacity nearly quadrupled from 278 million tons in 2003 to 1.12 billion ton in 2016, according to the Commerce Department. The growth went hand in hand with the country's efforts to urbanize, but China also overbuilt entire "ghost cities" that didn't lure new residents.
China also exported a lot of steel to the U.S., which used to lead the world in steel production. The flood of Chinese steel has been blamed for the loss of U.S. 50,000 jobs since 2000, a year before China joined the World Trade Organization.
Chinese authorities have shut down 115 million ton of steel capacity in the past two years and are predicting they will hit a 2020 target of 150 million tons this year, Reuters reported.
Meanwhile, the Commerce Department seeks to boost U.S. domestic steel capacity utilization from 73 percent to 80 percent with a several measures including the tariffs.
Dan DiMicco, the former CEO of U.S. steelmaker Nucor, said President Trump is right to slap tariffs on imported steel and aluminum, especially from China.
“The hard reality for most domestic manufacturers including the steel industry is that we’ve been in a trade war for 20 years,” DiMicco said on CNBC. “And now is the first time we’re standing up and saying, ‘Enough’s enough! We’re going to fight back!’”
DiNicco, who ran Nucor from 2000 until 2012, served as a trade adviser to Trump’s presidential campaign. He currently is chairman of the Coalition for a Prosperous America, a non-profit group that has opposed trade agreements like the Trans-Pacific Partnership, which Trump shelved after describing it as “a rape of our country.”
DiNicco said Trump needs to get tough with China, whose entry into the World Trade Organization in 2001 accelerated the decline of U.S. factories.
“We’re fighting back for them to abide by the rules they agreed to when they joined the WTO, for them to abide by the rules they agreed to when they got permanent favored nation trading status with the United States,” DiNicco said. “They’ve been cheating. They steal our IT. They cheat on the products. They subsidize. They manipulate their currency. We’ve been in a trade war, and we’re the ones that have been decimated because of this.”
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