Do foreign steelmakers threaten US national security?

President Donald Trump, in his April speech, painted a grim picture of the U.S. steel industry. For decades, he said, American steel companies were under siege by foreign competitors, “taking advantage of loose trade laws,” flooding the United States with cheap steel, leading to layoffs of workers.

The reality for the industry does not seem quite so acute. In 2016, the share prices of the two largest US steelmakers rose the most in at least a decade, based on tariffs on steel imports from China and elsewhere. But Trump insisted there was more at stake. “It’s not only prices, it’s not just work, it also has to do with the national security of our country,” he said.

In an April speech, Trump said supporting U.S. steel production is critical to protecting the country's defense industrial base. However, consumption of the defense industry accounts for less than 5 percent of total domestic steel consumption, according to. The aluminum industry is slightly more important to the military sector. High purity aluminum is a key material for jet fighters and ships.

It is unclear whether US policy will affect allies, in particular Canada, which supplies about 6 percent of the steel and 42 percent of the aluminum used in the US, according to researcher Wood Mackenzie Ltd. The administration may have to exclude Canada from any action taken because it is part of a technology and industrial national defense base focused on research, development, and production of military equipment in the United States.

It is difficult to predict what will come out of the Trump administration's intentions, in any case, imports will be precisely limited, which could lead to higher prices for domestic consumers, says Uday Patel, senior research manager at Wood Mackenzie.