US Eyes Global Tariff of “At Least” 24% on Steel Imports
US Eyes Global Tariff of “At Least” 24% on Steel Imports

US Eyes Global Tariff of “At Least” 24% on Steel Imports


As part of a “national security crackdown”, the White House gave its approval to implement tougher restrictions against imports of aluminum and steel, a move that was expected to instigate rage among key trading partners such as China and the European Union.

US commerce secretary Wilbur Ross stated on Friday that research conducted by the Department of Commerce had concluded that the rising imports of both metals have threated the national security of the United States. Consequently, the department has made recommendations to President Trump, to enact universal tariff of over 7.7 per cent on aluminum and 24 per cent on steel. Other recommendations include increasing the scope of the targeted tariffs against China.

The options were enthusiastically supported by domestic steel manufacturers and union bosses.  Leo Gerard, president of the United Steelworkers, believed that these suggestions could effectively punish bad players in international trade.”

Yet, many other business leaders are concerned that these moves could damage the US economy. “This is going to be a major problem for a lot of industries,” said Rufus Yerxa, President of the National Foreign Trade Council. Apart from resulting in higher costs for the auto and construction industries, there are probable retaliations made by other countries as well as challenges at the World Trade Organization.




US Eyes Global Tariff of “At Least” 24% on Steel Imports

The Trump administration has been given the green light to take tough action against imports of aluminum and steel as part of a national security crackdown likely to provoke an angry response from China, the EU and other trading partners around the world.  US commerce secretary Wilbur Ross said on Friday that separate investigations into imports of both metals launched last year had determined that surges seen in recent years “threaten to impair our national security”.  As a result, he said, he was recommending options to President Donald Trump including imposing a global tariff of “at least” 24 per cent on imports of steel and 7.7 per cent on aluminum.

Other possible moves call for higher and more targeted tariffs against China and a limited list of countries or blanket quotas meant to peg US imports of both metals to a fraction of their 2017 levels.  Mr Trump has until April to decide whether to adopt any of the recommendations, Mr Ross said.  The long-awaited results of the “Section 232” investigations into aluminium and steel imports caused shares in major US producers to rise sharply on Wall Street.  Trade hardliners in Mr Trump’s administration are eager to take action against China after months of being bogged down in an internal debate.  But the recommendations illustrate how Mr Trump’s desire to hit China, which the US steel industry blames for a collapse in metal prices in recent years, may result in collateral damage for US allies and invite retaliation. Officials in Brussels have already begun drafting possible retaliatory measures aimed at politically sensitive US products like Kentucky bourbon and Wisconsin dairy products.

Mr Trump has signalled repeatedly that he wants to impose tariffs and has become impatient with delays in delivering the trade crackdown he promised to his base.  Recommended Trump is losing his war on the US trade deficit. Does it matter? Europe risks being squeezed between Washington and Beijing During a meeting with members of Congress this week he said he was convinced that imposing tariffs would “create a lot of jobs” and dismissed warnings that such measures in the past had hurt more than they had helped by causing higher costs for many companies.  “I want to keep prices down but I also want to make sure that we have a steel industry and an aluminium industry and we do need that for national defence,” Mr Trump said. “If we ever have a conflict we don’t want to be buying steel [from] a country we are fighting.”  Mr Ross said the goal in the cases of both aluminium and steel was to lift the domestic industry’s capacity utilisation and that would create additional jobs.  In the case of steel the commerce department has recommended that the US either impose a global tariff of “at least” 24 percent on all imports or levy a 53 percent tariff on imports from a list of 12 countries including China, Brazil, India, South Africa and Vietnam as well as a quota of 100 percent of 2017 imports for all remaining countries. A third option calls for the US to limit imports via a blanket quota equal to 63 percent of countries’ 2017 steel exports to the US.

For aluminium the report recommends either a global 7.7 per cent tariff or a higher 23.6 per cent tariff on products from China, Russia, Venezuela, and Vietnam, accompanied by quotas for everyone else equal to 100 percent of their 2017 exports to the US. A third option calls for a quota of 86.7 percent of 2017 exports for all countries that ship aluminium to the US.  The options were hailed by domestic steel companies and also union bosses.  “These recommendations have the potential to focus on the bad actors in the world that historically and systemically cheat in international trade. We applaud that approach,” said Leo Gerard, president of the United Steelworkers.  But other business groups warned any such moves would hurt the US economy. “This is going to be a major problem for a lot of industries,” said Rufus Yerxa, president of the National Foreign Trade Council.  Besides resulting in higher costs for the auto and construction industries it would likely provoke retaliation by other countries and challenges at the World Trade Organisation, he said. It also, Mr Yerxa added, would set a dangerous precedent for other countries to impose their own trade restrictions in the name of national security, a line many countries and particularly the US have not been willing to cross. While Mr Trump has targeted his rhetoric at China, Canada is the leading source of US steel imports. The US neighbour has long been treated as part of the US defence industrial base along with countries like the UK and Australia.  But whether Canada or any other allies would be exempted remains unclear.  That “failure to categorically exclude Canada” and other allies “shows that this is not really about national security,” said John Veroneau, a former senior US trade official now at law firm Covington & Burling. “Section 232 is simply being used as a pretext for good old-fashioned protectionism.” Most imports of steel and aluminium products from China have been curtailed by anti-dumping and other duties in recent years and the Trump administration has continued to target them. The US industry argues, however, that Chinese producers have been evading those tariffs by shipping products through third countries.  Imports of steel and aluminium have also surged over the past year in an effort to get ahead of any tariffs. Last year, imports of steel were up 15 percent over 2016, according to data collected by the American Iron and Steel Institute.


Source: The Financial Times, Shawn Donnan, Feb 16, 2018. Photo credit to The Financial Times.

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