The President may not be able to move mountains, but he sure can move the stock market.   Donald Trump’s March 1 remarks on his intentions to impose punishing tariffs on all steel and aluminum imports caused a global uproar that continues to grow. Even without a formal decision, the Dow instantly dropped hundreds of points as steel and aluminum consumers and governments around the world protested.

It might be good for everyone to calm down and think this through again, before a binding decision is actually made. My starting point is that there is a legitimate national security issue that needs to be addressed, and it’s vitally important that this be done in the best way possible. Several key questions beg for smart, constructive and durable answers.

First, is the immediate national goal really to rebuild closed capacity in the US, or is it to create and maintain conditions favorable to new investment in both metals producing and metals consuming industries? It certainly isn’t just a matter of restarting cold furnaces at existing mills.   On the contrary, without imports we would have immediate, intense shortages. That’s especially true of the seven million tons of steel slabs shipped to rolling mills in the US that have no domestic supplier.   Such shortages might not last forever, but they will persist at least until sites for new mills were located, capital were raised to build them, all the necessary permits were secured, adequate electricity supply at internationally competitive rates were contracted, etc. Peter Marcus, the dean of steel analysts, likes to argue that shortages are “short ages,” but creating this amount of new capacity would take time – a lot of time.

Second, national security is supposed to be the legal basis for any decision under Section 232. Are all imports threatening in that regard? Some administration supporters argue that the US industry is under attack from imports that are dumped, subsidized and beneficiaries of intellectual property theft and rigged exchange rates. Absolutely true, but that sounds a lot like China which ranks number ten on the list of supplying countries and not much like Canada which ranks number one. When one resident defrauds a neighbor, can the problem best be solved by punishing everyone in town?

Third, we know from experience that across-the-board tariffs drive metal consumers off shore. For some customers, the metal content of their product – like the can of soup that Secretary Ross displays – are small, even trivial. For many other customers, however, the metals component of their total cost is substantial; think, auto parts and energy equipment.   They face fierce competition from imports themselves, and many are locked into fixed-price contracts with big customers. Off-shoring can become the only alternative for them   When that happens, production and incomes in the US suffer. Trump says he’s smarter than George W. Bush. Why repeat his mistakes?

So in the next week or two perhaps we could do a mulligan. Why not try to devise a detailed program that:

  • Distinguishes between friendly, reliable, fair foreign suppliers and unfriendly, unreliable, unfair ones?
  • Puts more pressure on governments that build up and sustain uneconomic industries than it does on US downstream competitors?
  • Establishes a negotiating process that would enable the administration to use the leverage of impending action to extract useful concessions from at least some trading partners?
  • Leads to a concerted international effort to eradicate the causes of the problem – foreign subsidies, anticompetitive practices, and IP theft?
  • Assures that new import surges will not disrupt the long process of investment in new plant and equipment?
  • Revisits neglected areas of public policy that could have a direct and powerful impact on the demand for metals and the economics of producing them in the US, such as a massive, sustained infrastructure program and a competitive, border adjustable consumption tax?

As I can personally attest, American government and business interests have complained for years – no, decades – about the lack of action to remedy the problem. Sadly, the last effort to fashion a comprehensive national policy for steel was undertaken by the Carter administration in 1980. This administration has the opportunity to act to reverse decades of subpar public policy. Wouldn’t it be worth taking the extra time to get it right?