As war ravaged the Korean Peninsula in the early 1950s, China suffered fifteen times the casualties and missing-in-action losses of their American counterparts, according to some U.S. and South Korean estimates. While the “human waves” sent to the front lines by Mao Zedong ultimately saved the communist regime in North Korea, the carnage was devastating and the humiliation injurious.
To put China on a more equal footing with the industrialized West, Chairman Mao instituted the “Great Leap Forward” by the late 1950s, seeking the radical transformation of a dirt-poor agricultural society. The measures enacted led a nation of peasants to melt their pots and pans in backyard furnaces in futile attempts to produce steel. The consequent “pig iron” skillets were useless and, accompanied with the implementation of collective communal kitchens and other sweeping measures to transform production, the result was roughly 30 million deaths from starvation – though some estimates suggest the toll was even higher.
During this same period, U.S. Steel grew into a global industrial kingpin, becoming the world’s first billion dollar company in 1901. J.P. Morgan’s merger of several leading steel manufacturers, including the Carnegie Steel Corporation, would help the United States win both World Wars I and II and generate a global reputation as an iconic American institution.
But such is 20th century history; The 21st century is already quite different.
In a world seemingly turned upside down, the People’s Republic of China is now the world’s largest producer of steel. The Baowu Group is ranked No. 1, and five other companies are listed in the World Steel Association Top 10. As of 2022, the top American steel company, Nucor, weighed in at No. 16, while two others, Cleveland-Cliffs and U.S. Steel, lagged behind at No. 22 and No. 27, respectively.
So, what happened? To start, China was admitted into the World Trade Organization (WTO) in 2001 after 15 years of global lobbying. With the playing field leveled through free trade with a country of over 1 billion mostly impoverished workers, the People’s Republic quickly established itself as the world’s principal factory and came to dominate key industries like steel.
In the decades that followed, the American steel industry faced more extensive and stiffer environmental regulations in ways Chinese producers did not. U.S. labor unions played a role too, challenging American steel manufacturers in ways not possible in an illiberal regime like China’s.
Like it or not, Beijing’s communist rulers proved themselves to be formidable from a purely business perspective, their bottom line benefiting from the absence of environmental stewardship and amoral labor standards.
By the time President Donald Trump was elected in 2016, the U.S. had already lost over 3 million jobs in the manufacturing sector to China, according to a report by the Economic Policy Institute. The losses help explain how a political novice from New York City swept the rust-belt states of Pennsylvania, Ohio, Wisconsin, and Michigan and ultimately took the general election.
In an effort to challenge China’s dumping of steel on U.S. markets – measures that made it impossible for American companies to compete fairly – the Trump administration issued a 25% tariff on steel coming into the country in 2018, bolstering the value of U.S. manufacturers.
While that helped U.S. Steel, the company today remains saddled with roughly $800 million in debt, and clearly needs assistance.
Cleveland-Cliffs, a rival based in Ohio and led by a Brazilian national, stepped in with an offer of $7.3 billion last summer, which U.S. Steel promptly rejected. The company was just back in the news announcing the closure of a West Virginia plant because the International Trade Commission ruled against foreign tin tariffs. Tragically, that’s another 900 American jobs facing the axe. The local U.S. Steelworkers union has pledged to fight the decision by Cleveland-Cliffs, calling closure a “travesty” and “un-American.”
In December, Japan’s Nippon Steel Corporation, globally ranked No. 4, offered $14.1 billion and the assumption of debt. It represented a forty percent greater valuation than stock value at the time and U.S. Steel agreed to it.
Politicians courting the rust belt vote, including former President Trump and Robert F. Kennedy, Jr., have indicated they would oppose the deal since the national U.S. Steelworkers’ representatives have favored Cleveland-Cliff’s offer. This opinion may shift with the latest headlines from West Virginia. But, in the final analysis, they are all neglecting a larger problem – present day China.
China’s rise has been anything but peaceful. Beijing’s communist rulers menace their neighbors with military force; they send balloons over the United States to engage in espionage, cheat on trade, and steal intellectual property.
In a positive sign the Biden administration is taking the threat seriously, it plans to invest billions to replace Chinese cargo cranes at U.S. ports. This move underscores why we must work with allies to produce steel rather than rely on China.
Simply put, the United States needs allies like Japan to help manufacture steel. If Nippon Steel and U.S. Steel can join forces to become more productive in their collective operations and scale a competitive steel industry, it will benefit the national security of both nations.
The bottom line is that ensuring the viability of America’s industrial base is the surest means of upholding the principle of fair competition and reinforcing the economic vitality and national security we once relied on to lead the globe.
Prof. Ivan Sascha Sheehan is the associate dean of the College of Public Affairs and past executive director of the School of Public and International Affairs at the University of Baltimore. Opinions expressed are his own. Follow him on X@ProfSheehan
