Since the 1980s, the United States has faced tough foreign competition when it comes to steel. While foreign production increased beginning in the 1950s, American production stalled and then decreased. By 1985, the U.S. was a major importer of steel, whereas it had once imported only 1 percent of its total needs. The struggles of the steel and auto industries during the 1980s were seen as representative of the struggles facing the nation as a whole: what would happen to America if we were not the highest-tech, most competitive producer in the world?
In recent years, tariffs have been levied on steel imports to try and protect remaining domestic production. However, the woes of American steel companies continued. The largest steel producer in Japan, Nippon Steel, is looking to purchase U.S. Steel. This acquisition of a major American steel producer, once the most valuable company in the world, is a psychological blow to domestic heavy industry. The iconic company has its roots with Andrew Carnegie and J.P. Morgan, two titans of the Gilded Age.
At a campaign rally during his ongoing re-election bid, U.S. President Joe Biden announced that his administration would block the sale of U.S. Steel to Nippon Steel, keeping the company domestically owned. In addition, Biden called for increasing tariffs on imported steel and aluminum, which would help domestic producers. This is a rare area of policy agreement between Biden and his Republican rival, former president Donald Trump.
Foreign Steel a Major Import
Foreign steel producers became major rivals in the decades after World War II. The war had destroyed much of the steel production of Japan, Germany, and France. When these plants were rebuilt with the latest technology, they could produce steel at lower per-unit costs than most American companies. Because American producers, such as U.S. Steel, were so large and entrenched, upgrading their equipment was difficult. This led to a slow decline in competitiveness, especially in the face of controversial alleged tactics by foreign rivals like dumping – intentionally selling their steel at below-market prices to undercut competitors.
Steel Strongly Linked to National Security
Maintaining domestic control of our steel production is vital for national security. Our most important infrastructure, including renewable energy tools like windmills, are made using steel. Imported steel, which is transported in bulk, would be vulnerable to suspension or loss during any conflict. Automobiles, trains, planes, ships, tractors, construction equipment, rebar, and weaponry are all made using steel as well, making it necessary for industries like transportation, agriculture, construction, and defense. Allowing a large domestic steel producer to be sold to a foreign company creates reduced production risk, potentially threatening our ability to dramatically increase steel production in the event of a crisis.
A foreign owner might decide to sell off steel-producing capital during peacetime, leaving the U.S. vulnerable during wartime. Keeping U.S. Steel American-owned would allow the U.S. government to maintain closer ties to the company and keep it operational. This does not mean allowing the firm to languish but rather ensuring it takes the necessary steps to remain competitive and viable. Protectionism doesn’t have to be a dirty word, but a way to invest in our own security.
