President Donald Trump has launched an investigation into countries that export steel to the United States, raising the prospect of new tariffs on imports.

The investigation is designed to stop countries from flooding the US with artificially cheap steel and undercutting local suppliers.

China is most often associated with the practice but President Trump said it had “nothing to do” with Beijing. The president said it was about protecting US security.

The news caused shares in US steelmakers to rise sharply.

However, Asian steelmakers also climbed as investors appeared to shrug off the news.

The US government has previously attempted to shield national steelmakers from cheap foreign steel through the World Trade Organization, but the Trump administration says this has had little impact.

Image source Wikimedia

Instead, the investigation will fall under the US Trade Expansion Act of 1962, which lets the president impose restrictions on imports for reasons of national security.

“Steel is critical to both our economy and our military,” President Trump said.

“This is not an area where we can afford to become dependent on foreign countries.”

China is the largest national producer and makes far more steel than it consumes, selling the excess output overseas, often at subsidized prices.

However, Japan and South Korea have also been accused of dumping in the past.

Commenting on the probe, Commerce Secretary Wilbur Ross said Chinese exports now accounted for 26% of the US steel market.

Wilbur Ross said exports had risen “despite repeated Chinese claims that they were going to reduce their steel capacity”.

“The artificially low prices caused by excess capacity and unfairly-traded imports suppress profits in the American steel industry,” the administration said in a statement.

Wilbur Ross said that if the investigation found the US steel industry was suffering from excess steel imports, he would recommend retaliatory steps that could include tariffs.

President Trump has been highly critical of China’s trade practices in the past but has softened his tone of late as he seeks greater cooperation over North Korea.

Earlier in April, Donald Trump said his administration would not label China a currency manipulator, rowing back on a campaign promise.

Donald Trump had previously accused China of suppressing the yuan to make its exports more competitive against American goods.

US steel stocks rallied on April 20 with the Dow Jones US Iron and Steel Index closing 5% higher.

However, Asian steel stocks also climbed with Japan’s Nippon Steel up 1.3% on April 21 and South Korea’s Posco gaining 2.5%.

Meanwhile China’s Baoshan Iron & Steel Co, Angang Steel and Baotou Steel each gained around 0.3%.