President Donald Trump says he is protecting national security by imposing tariffs on steel and aluminum imports, but he may have just thrown a bomb into the global trading system.
Using national security to justify tariffs will likely invite copycat behavior from other countries — ranging from India restricting U.S. agriculture imports in the name of food security, to China defending its massive subsidies to industry as a security necessity. The result could be a cascade of unintended consequences that could restrict the ability of Iowa farmers to export corn, automakers to competitively sell cars overseas and increase costs to U.S. consumers.
More ominously, experts say the move represents a nuclear option in the trade world that threatens the very institutions that maintain the global economic order.
“Using national security in a way that nobody believes — it’s a complete perversion of what is supposed to be extraordinary latitude in the world trading system for countries to deal with their national security interests,” said Gary Hufbauer, a senior fellow at the Peterson Institute for International Economics.
There’s an unspoken truth at the World Trade Organization, where countries routinely challenge each other’s trade actions: Nobody invokes national security and nobody questions national security, even though WTO rules allow countries to take extraordinary steps if they feel their national security is at risk.
A legal challenge that will likely arise at the WTO over the U.S. tariffs could force a judicial panel to rule on the sacred question of what is or isn’t national security. That could massively erode support for the international system, especially from the Trump administration, which has already scorned WTO decisions that it contends infringe on U.S. sovereignty.
A WTO panel has “never done it before, and they realize if they do that, that’s going to be the death knell of the WTO,” Hufbauer said.
The Trump administration strongly argues that a 25 percent tariff on steel and a 10 percent tariff on aluminum is necessary to maintain national security. “Economic security is national security,” the White House trumpeted in a fact sheet released just prior to Trump’s announcement.
A senior administration official said the rationale from a national security and economic security perspective is “unassailable.”
“We need aluminum and steel to build everything from the Bradley Fighting Vehicle, an F-35 Joint Strike Fighter, to the littoral combat ship, the Tomahawk Missile, Delta IV and Atlas V rockets,” the official told reporters. “And, importantly, as we move on this national security argument, broadly defined, again, it’s not just defense applications. It’s also things like critical infrastructure, whether it’s the electricity grid, dams, transportation projects, water and sewer treatment plants.”
The Commerce Department investigation that cleared the way for Trump to impose tariffs concluded that a flood of cheaper imports threatened domestic industries to the point where they might be unable to “meet demands for national defense and critical industries in a national emergency.”
“It is permissible under WTO rules to do what we are doing and we are doing that,” the official added.
But legal experts say Trump and his advisers have undermined their own national security case by tying restrictions on Canada and Mexico to their cooperation in NAFTA talks. Those two countries were officially exempted from the tariffs for national security reasons, but Trump continued to tie their exclusion to the outcome of NAFTA negotiations in his remarks before signing the tariff orders.
“When the president publicly states that he’s willing to exempt Mexico and Canada if they give him concessions in NAFTA negotiations, he’s undermining the weak legal argument they have to begin with,” said Matt Gold, a former U.S. trade official under President Barack Obama who works now as a legal trade consultant.
The Commerce Department’s investigation, conducted under an obscure provision of the Trade Expansion Act of 1962, also includes a cautionary note from the Defense Department.
Defense Secretary Jim Mattis said he agreed with Commerce’s findings that unfair trade and its impact on the U.S. industrial base “poses a risk to our national security,” but said there was little risk the military would suffer a shortage of steel or aluminum.
“The U.S. military requirements for steel and aluminum each only represent about three percent of U.S. production,” Mattis wrote in a memo. “Therefore, DoD does not believe that the findings in the reports impact the ability of DoD programs to acquire the steel or aluminum necessary to meet national defense requirements.”
The WTO’s national security exception leaves open a number of ways a country can justify a trade restriction. Mattis’ note would likely preclude the use of one of those national security exceptions, which can be interpreted to mean the supply of military equipment.
In this case, the likely defense would be under an “emergency in international relations,” Gold said.
That envisions a scenario in which the world is in the grips of a major conflict to the point where ocean shipping is disrupted and steel and aluminum imports are cut off, he said.
“It’s a weak, bordering on absurd, argument,” Gold said of the administration’s rationale.
There’s also a fear that once the U.S. goes down the path of justifying trade restrictions on the basis of national security, it will be difficult to backtrack.
“At some point you’ll have to say, ‘Well, there’s no longer a national security problem.’ And why? So the national security justification will make it even harder to back out, and I think the world will see through this,” said Carlos Gutierrez, former Commerce secretary under President George W. Bush who is now chairman of the National Foreign Trade Council.
He added that the U.S. is just walking into an “entanglement.”
“It just becomes a more complex web to get out of,” Gutierrez said. “Trade wars are easy to get in but difficult to get out of.”
It also sets up a potential confrontation with the WTO, especially with skepticism of the WTO already running high in the Trump administration, said former U.S. Trade Representative Michael Froman, now a senior fellow at the Council on Foreign Relations.
“One reason why the U.S and others have been so reluctant and so careful about not invoking the national security exception is precisely because we don’t want the WTO necessarily adjudicating how to define essential national security,” Froman said during a conference call this week.
Froman warned that a WTO challenge of the Trump tariffs could put the global trading system “at the center of a crucible.”
“One view of this is it’s a way of bringing the WTO to a moment of crisis to justify potentially the U.S. withdrawing from the dispute settlement procedures,” he said.