The United States Department of Commerce will launch an investigation into imports of uranium, citing the same concerns about national security that it did before implementing tariffs on steel and aluminum.

In a release Wednesday, Commerce Secretary Wilbur Ross said he has formally begun an investigation into the U.S. uranium industry by invoking a clause in U.S. law called Section 232 of the 1962 Trade Expansion Act — a rarely used law that allows the White House to implement tariffs or quotas on foreign imports if they are deemed to "threaten to impair the national security" of the United States.

The investigation will cover all aspects of the industry, from mining through enrichment for electricity generation, its role in military defence, and other industrial uses.

Canada is the second-largest producer of uranium in the world and a major supplier to the U.S. market.

Thirty years ago, the United States produced almost half of the uranium it consumes, but that ratio has dropped to just five per cent today, Ross said in a release announcing the probe.

"The Department of Commerce's Bureau of Industry and Security will conduct a thorough, fair, and transparent review to determine whether uranium imports threaten to impair national security," Ross said.

The department launched a similar investigation into foreign-made steel and aluminum earlier this year. Within weeks, the U.S. government had put a tariff on imported metals, including from Canada.

That prompted a wave of retaliatory tariffs from other countries on U.S.-made products, a tit-for-tat escalation that continues to reverberate through the global economy.

The strategy of invoking national security to accomplish trade goals is becoming a favourite tool for the current administration, but it's one that's unlikely to work in the long run, said Chris Sands, senior research professor and director of the Center for Canadian Studies at the Johns Hopkins University School of Advanced International Studies in Washington, D.C.

"If you use this provision often enough, people will start to want to take it away from you," Sands said, implying that Congressional leaders already unhappy with the current administration's trade policies could soon take legislative steps to rein in the White House on trade.

Sands said extending the Section 232 clause to the uranium market is "not a reasonable use," especially if it doesn't exempt Canada, which is why he expects the administration's strategy to backfire.

"What most people in Congress would like is for the trade relationship with Canada to be normal," Sands said. "Not this crazy, high-stakes, insult-ridden conflict."

Another global trade spat

The U.S. uranium industry, meanwhile, is welcoming the news. The probe is exactly what two U.S. uranium companies — Energy Fuels and Ur-Energy — had lobbied the government to do back in January.

At the time, the U.S. companies argued that rival producers in Russia, Kazakhstan, and Uzbekistan were producing 40 per cent of the uranium used in the U.S., and that local companies couldn't compete fairly because the foreign producers were heavily subsidized by their governments.

"While U.S. producers can fairly compete with foreign production on a level playing field, it is difficult for them to compete with heavily subsidized foreign production," the two companies said in a joint statement welcoming the investigation Wednesday.

Uranium concentrate, commonly known as yellowcake, has many industrial uses, including power generation. Cameco mined almost 24 million pounds of uranium last year — some of it in the U.S. — and almost 30 per cent of it was sold to the U.S. (Daniel Acker/Bloomberg News)

The two U.S. companies have laid off more than half their workforce over the past two years and are currently operating at nine and 13 per cent of their respective capacities.

They wanted the government to impose a law that would effectively set aside 25 per cent the U.S. market for uranium to U.S. suppliers. That would mean U.S. uranium companies would be supplying 12 million pounds of uranium per year.

That's 12 times more uranium than than the entire U.S. industry produced last year. And they haven't produced more than five million pounds a year since 2002, Toronto-Dominion Bank analyst Greg Barnes said in a note to clients after the news came out.

But Russia, Kazakhstan, and Uzbekistan aren't the only foreign suppliers of uranium to the United States. Canada is the world's second-largest producer of uranium, with more than 23 million pounds in 2016.

Saskatoon-based Cameco Corporation mined almost 24 million pounds of uranium last year, and almost 30 per cent of it was sold to the U.S.

But some of Cameco's production comes from inside the U.S. anyway. Two Cameco-owned mines at Crow Butte and Smith Ranch-Highland, Barnes noted, have the capacity to produce up to three million pounds a year. They are currently only on track to produce about 100,000 pounds this year due to curtailed production.

"Restricting Cameco's ability to sell uranium to U.S. utilities to only what it can produce in the United States may negatively impact the company's overall sales portfolio," Barnes said of what the news could mean for Cameco.

Ken Neumann, Canadian director of the United Steelworkers, which represents workers in the uranium mining and processing sectors in Western Canada and Ontario, said uranium exports from Canada do not present a national security threat to the U.S.

"There is simply no evidence to justify Canada's inclusion in this investigation in the first place, let alone the prospect of imposing tariffs or quotas on Canadian uranium exports," Neumann said in a statement.