An interim report by the federal government think tank found safeguard measures on imports on fabricated structural steel products - like columns, beams and girders - were not warranted.
While imports of the products had grown 28 per cent over five years, it did not meet the World Trade Organisation legal standard of a significant and sudden jump that causes serious injury to the domestic industry, the commission said.
"Submissions and our consultations and engagement with industry show that some individual businesses and market segments are under pressure, and we found evidence for this in the data," commissioner Barry Sterland said.
"However, the evidence does not show that this is the case for the industry as a whole."Â
The Australian Steel Institute, which asked the government to impose the tariffs to protect against "overproduction" of cheap Chinese steel, said it was disappointed with the commission's report.
"We are working through the detail of the report to understand the reasoning behind the decision; and will make a final submission to provide evidence in support of the application," the institute's chief executive Mark Cain said.
Weld Australia said the commission's report conceded imports were rising, employment had fallen from its peak, and parts of the industry were facing difficult conditions.
"Yet its answer is that the damage is not 'sudden' or 'serious' enough to justify action," chief executive Geoff Crittenden said.
"Tell that to the Australian welders and fabricators closing their doors."
Master Builders Australia urged the government not to impose more tariffs on complying imports, arguing access to affordable building materials were needed to solve Australia's housing shortfall.
Australia has already imposed tariffs of up to 82 per cent on Chinese steel products, such as hot-rolled coil steel, in response to alleged dumping by Chinese exporters.
It's the second time in a matter of weeks a Productivity Commission report has incurred the wrath of interest groups.
Commissioner Angela Jackson said Western Australia Premier Roger Cook crossed a line for labelling the commission "east coast clowns" over a report recommending an end to the 2018 GST deal.
Political attacks undermining the commission's integrity were part of a broader trend in public debate, Dr Jackson said in August.
