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U.S. to Impose High Duties on Steel and Aluminium Imports

President Trump on 8 March signed two presidential proclamations imposing additional tariffs of 25 percent and 10 percent, respectively, on U.S. imports of foreign-made steel and aluminium products. Established within the context of separate investigations conducted under Section 232 of the Trade Expansion Act of 1962 on the impact of steel and aluminium imports on U.S. economic security and military preparedness, these additional tariffs will apply to subject merchandise entered or withdrawn from warehouse on or after 12:01 a.m. on 23 March.

The following products are covered by these proclamations.

  • steel articles classified under HTSUS subheadings 7206.10 through 7216.50, 7216.99 through 7301.10, 7302.10, 7302.40 through 7302.90, and 7304.10 through 7306.90, including any subsequent revisions to these HTSUS classifications
  • the following aluminium articles: (i) unwrought aluminium (heading 7601); (ii) aluminium bars, rods and profiles (heading 7604); (iii) aluminium wire (heading 7605); (iv) aluminium plate, sheet, strip and foil (flat rolled products) (headings 7606 and 7607); (v) aluminium tubes and pipes and tube and pipe fitting (headings 7608 and 7609); and (vi) aluminium castings and forgings (HTSUS 7616.99.5160 and 7616.99.5170), including any subsequent revisions to these HTSUS classifications

The president considered a number of factors in adopting these tariffs, including the reports prepared by the U.S. Department of Commerce, updated import and production numbers for 2017, the failure of countries to agree on measures to reduce global excess capacity, the continued high level of imports since the beginning of the year, and special circumstances that exit with respect to Canada and Mexico. The president believes the measures will help the domestic steel and aluminium industries to revive idled facilities, open closed mills and smelters, preserve necessary skills by hiring new steel and aluminium workers, and maintain or increase production, which will reduce the need of the United States to rely on foreign producers for steel and aluminium and ensure that domestic producers can continue to supply all the steel and aluminium necessary for critical industries and national defence.

Imports from Canada (the largest U.S. supplier of both steel and aluminium) and Mexico (the fourth largest U.S. steel supplier and tenth largest U.S. aluminium supplier) are exempt from these additional tariffs, at least at this time. The proclamations state that on-going discussions with these two countries should continue in light of the shared commitment to supporting each other in addressing national security concerns and global excess capacity, the physical proximity of regional industrial bases, robust regional economic integration, the export of steel articles produced in the United States to Canada and Mexico, and the close relationship between U.S. economic welfare and U.S. national security. It appears, however, that this exemption is linked to the successful conclusion of a “new and fair” North American Free Trade Agreement that would ostensibly require Canada and Mexico to make a number of important concessions to the United States. Canadian and Mexican trade officials have rejected a link between the two matters, a link that, curiously, would appear to undermine the Trump administration’s thesis that the additional tariffs were imposed on the basis of a national security, rather than a purely economic, rationale.

Other countries with which the United States has a security relationship may petition the administration to find alternative ways to address the threatened impairment of national security caused by imports from that country. If the United States and the petitioning country arrive at an agreement, the president may modify the application of the tariffs with respect to that country. It is understood that several economies, including Australia, Japan, South Korea and the European Union, have already discussed the possibility of an exemption with senior U.S. officials.

The U.S. secretary of commerce is required to issue by 18 March the procedures to be followed to petition for a product to be exempted from the additional tariffs. If after petitioning and consultation with other government agencies it is determined that such steel or aluminium products are not produced in the United States in a sufficient and reasonably available amount, or that such products are not of a satisfactory quality, the secretary may issue a Federal Register notice amending the tariff treatment of that article. If a non-availability determination is made the modification of the tariff measure will be effective 23 March as well, which means that any such determinations could be applied retroactively.

The domestic and international backlash to these additional tariffs has been quite substantial. In the United States, U.S. Chamber of Commerce President and CEO Thomas J. Donahue on 7 March expressed concern about the “increasing prospects of a trade war, which would put at risk the economic momentum achieved through the administration’s tax and regulatory reforms.” Senior Republican members of the House Ways and Means and Senate Finance committees have also shown their frustration, although Ways and Means Committee Chairman Kevin Brady (Texas) and Trade Subcommittee head Dave Reichert (Washington) welcomed the exemption for Canada and Mexico as a good first step. Finance Committee Chairman Orrin Hatch (Republican-Utah) on 8 March described the tariffs as “misguided,” while Sen. Jeff Flake (Republican-Arizona) is calling on his colleagues to “immediately draft and introduce legislation to nullify these tariffs.”

Internationally, the likelihood of a global trade war that could shatter a multi-lateral trading system that the United States was instrumental in creating has significantly increased as a result of President Trump’s decision to impose these high duties. Indeed, both the EU and mainland China have threatened to retaliate within days of the imposition of any remedies and such retaliation may target a broad range of products. Other large U.S. suppliers, such as Brazil, South Korea and Turkey, are also likely to impose countermeasures of their own unless they are able to obtain an exemption that does not require them to make substantial or politically unpalatable concessions.

If the EU does not obtain a full exemption for all of its members it is expected to proceed with a three-track strategy that would involve (i) prosecuting the EU’s rights in the World Trade Organisation, possibly in co-ordination with other countries; (ii) protecting the EU steel and aluminium markets from imports that may be diverted as a result of the U.S. tariffs by adopting safeguard measures that maintain the existing openness of those markets; and (iii) adopting countermeasures, as allowed under the WTO Safeguard Agreement, that match the economic loss derived from the U.S. tariffs in order to rebalance benefits that the EU has given to the United States in the past.

EU Trade Commissioner Cecilia Malmström, who announced the plan on 7 March, said the European Commission believes “the motivation of the U.S. is an economic safeguard measure in disguise, not a national security measure,” thereby allowing the EU to use the WTO Safeguard Agreement to respond to any U.S. action. While a list of products to be targeted is still being discussed, a 6 March article by Bloomberg states that apparel products such as jeans and shirts could be included in an eventual retaliation list, as well as steel and other industrial products, orange juice, bourbon whiskey, corn and other agricultural products, motorcycles, cosmetics and pleasure boats. Other products that have been mentioned in recent days include cranberries and peanut butter.

Mainland China, for its part, has decried the additional tariffs – Commerce Minister Zhong Shan warned recently that a trade war would have “no winners” – and is expected to pursue a “tit-for-tat” strategy in response to any trade barriers imposed by the United States. Perhaps as a harbinger of things to come, mainland China initiated in early February separate antidumping and countervailing duty investigations on imports of U.S. sorghum, with some analysts linking those proceedings to the safeguard actions on washers and solar products. According to the U.S. Grains Council, more than three-quarters of sorghum grown in the United States is exported to mainland China, with shipments totalling US$1 billion or 4.8 million tonnes in 2017.

A 7 February report by Bloomberg suggests that U.S. soybeans could be the next target, noting that MOFCOM has been exploring the possibility of pursuing trade measures against this key crop since January. Mainland China imported a massive US$13.9 billion worth of U.S. soybeans last year but an eventual trade remedy action would put that lucrative business in jeopardy, with Brazil, Argentina and other large foreign suppliers poised to fill the gap.

Other potential high-impact retaliatory actions that Beijing could pursue in the coming months (especially if the United States imposes restrictions in the still on-going Section 301 probe into mainland China’s acts, policies and practices related to technology transfer, intellectual property and innovation) include, among others, placing restrictions on imports of U.S. beef by adopting more stringent health and safety standards for these products (which could effectively reverse a 2017 decision to allow the importation of U.S. beef and beef products for the first time since 2003), targeting imports of U.S. civilian aircraft as well as other U.S. agricultural products and even semiconductors, and/or persuading mainland Chinese tourists not to visit the United States.

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