BREAKING NEWS: Trump Signs Tariffs for Steel and Aluminum Imports
President Donald Trump did what he said he was going to do last week, signing a proclamation imposing new 25-percent tariffs on steel imports and 10-percent tariffs on aluminum imports. The tariffs come under the president’s authority under Section 232 of the Trade Expansion Act which allows the chief executive to slap tariffs on imports for national security reasons and after the Commerce Department released reports on the subject last month which urged him to do so.
But, contrary to the president’s words and those of some of his spokespersons over the last week, the tariffs did not reach across the board of all metals imports but exempted NAFTA partners Canada and Mexico from the measures. The new tariffs will become effective in 15 days.
Included in the tariffs are the European Union, South Korea, and Australia, all of them among the biggest exporters of steel to the United States. But Trump commissioned US Trade Representative Robert Llighthizer to negotiate “with countries that seek an alternative to the tariffs.” Leaders in Australia and South Korea urged the president to grant them exemptions from any tariffs, citing the salutary trade and strategic relations enjoyed by the US with those countries.
Trump’s move threatens to ignite a trade war with the EU, one of the most important trading partners for the US. The EU reportedly has a list of US products it is going to target for extraordinary tariffs, including bourbon whiskey and Harley-Davidson motorcycles. Not only are these quintessentially American products, but are also centered in Kentucky and Wisconsin, respectively, home to Senate Majority Leader Mitch McConnell and Speaker of the House Paul Ryan.
The new tariffs had already been injected into the NAFTA negotiations. “Canada would view any trade restrictions on Canadian steel and aluminum as absolutely unacceptable,” said Canadian Foreign Minister Chrystia Freeland, at the close of the seventh round of NAFTA talks earlier this week in Mexico City. Canada is the number one exporter of both steel and aluminum to the United States.
Mexico announced it would have retaliating against new US tariffs, with Mexico’s Secretary of Economy Ildefonso Guajardo Villarreal telling a Mexican television interviewer that “there’s a list of US products that we are analyzing internally.”
The exemptions granted by Trump to NAFTA partners Canada and Mexico thereby become interesting, because it shows that Trump is not interested in sabotaging the NAFTA talks, at least not yet, despite his repeated threats to pull the US out of the 24-year old trade accord. But it is clear the exemptions he granted to Canada and Mexico are related to NAFTA.
“I have the feeling we will make a deal [with Canada and Mexico on NAFTA,] and if we do there won’t be tariffs on Canada and Mexico,” said Trump. “But if we don’t make the deal we will terminate NAFTA.”
The president’s announcement of steel and aluminum tariffs last week sent shock waves across Washington, with internal White House divisions coming to a head, prompting the resignation of economic advisor Gary Cohn and strengthening the hand of trade advisor and economic nationalist Peter Navarro. Meanwhile, on Capitol Hill, over 100 Republican lawmakers, and many Democrats as well, urged the president not to impose broad tariffs on steel and aluminum exports. Ryan also expressed concern over the impending move and said he disagreed with Trump’s policy once the tariffs were imposed.
It’s been said that Trump’s policies on aluminum and steel were really all about China from the beginning, and Trump did mention Chinese dumping and overcapacity in his remarks when he signed the proclamation. The US accounts for 14 percent of China’s aluminum exports and China is the fourth-largest overseas supplier of aluminum to the US. Given those figures, it’s possible that Trump’s tariffs could effectively punish China and support the domestic aluminum industry, although US industries that rely on aluminum, like makers of recreational boats, oppose the tariffs.
As far as steel goes, China is the eleventh largest exporter to the United States, generally accounting for less than three percent of steel imports over the last few years. And China’s steel exports have been falling to the point where it wasn’t even on the radar screen when the US International Trade Administration reported on the top origins of imported steel for the first nine months of 2017. Given China’s meager participation in US steel trade, it’s hard to see how Trump’s tariffs are going to make much of a difference on that score.
Meanwhile, Trump’s broad-brush approach to international trade policy means that the president is also jeopardizing US trade and diplomatic relations with any number of staunch partners and allies.