US Steel, Aluminium Tariffs Take Effect As Trading Partners Debate Options

29 March 2018

The US has confirmed which countries will be subject to temporary exemptions from tariffs on steel and aluminium, even as heated debate continues in multiple trade forums over what these measures will mean for those sectors and for the wider global economy. 

Late last week, US President Donald Trump issued two presidential proclamations on steel and aluminium, respectively, which updated the previous proclamations announcing the duties. Both documents said that the US will now hold additional talks with Australia, Argentina, Brazil, South Korea, and the European Union, as well as Canada and Mexico “on satisfactory alternative means to address the threatened impairment to the national security by imports” of those products. 

“Each of these countries has an important security relationship with the United States and I have determined that the necessary and appropriate means to address the threat to the national security posed by imports from steel articles from these countries is to continue these discussions and to exempt steel articles imports from these countries from the tariff, at least at this time,” the proclamations say.

It also suggests that other countries could earn similar exclusions, provided they make their case to the US accordingly. The proclamation also says that the exemption for the above-mentioned countries will expire on 1 May, unless those countries manage to negotiate an arrangement with the US that would “remove the threatened impairment to national security.”

Trump has argued that the tariffs are needed to address national security concerns, following an investigation by the US Department of Commerce under Section 232 of the 1962 Trade Expansion Act. Several trading partners have questioned the merits of using a national security justification for unilateral trade measures, suggesting that this could set a hazardous precedent. Various traditional allies of the United States have also said that their long history of collaboration on security issues should be proof positive that their imports are not posing a national security risk to Washington.

For those countries not exempted, the ad valorem tariffs are set at 25 percent for imported steel and at 10 percent for imported aluminium. (See Bridges Weekly, 15 March 2018)

The top ten sources of imported steel into the US are Canada, Brazil, South Korea, Mexico, Russia, Turkey, Japan, Germany, Taiwan, and China, in that order, according to US government statistics. Together, these 10 countries make up over three-quarters of US steel imports, as measured by volume.

While some of these countries were temporarily excluded from tariffs, the US did not exempt China, Japan, Russia, South Africa, Turkey, or Taiwan, prompting trade ministries from many of these countries to issue statements criticising the move. Some have warned, for example, that excluding some countries from the duties while applying them to others could create an additional hindrance for their exporters.

“[South Africa] notes with concern that it is not excluded from the application of the duties on steel and aluminium. The imposition of the duties will have a negative impact on productive capacity and jobs in a sector already suffering from global steel overcapacity,” said a statement from South Africa’s Department of Trade and Industry.

EU prepares for steel influx, launches safeguard investigation

Across the Atlantic, the steel tariffs continue to invite scrutiny from the European Union, which is one of the US’ largest trading partners. Steel, as well as other developments in international trade, were among the headline items on the European Council’s agenda on 22-23 March.

“The European Council regrets the decision by the United States to impose import tariffs on steel and aluminium. These measures cannot be justified on the grounds of national security, and sector-wide protection in the US is an inappropriate remedy for the real problems of overcapacity, on which the EU already has offered the US its full cooperation in multiple fora, including the Global Forum [on Steel Excess Capacity],” said leaders in the Council’s conclusions document.

They also called upon Trump to ensure that the 28-nation bloc is exempted from tariffs on a permanent basis, rather than being bound by a 1 May negotiating deadline.

Individual leaders have also weighed in publicly, with French President Emmanuel Macron telling reporters on Friday that the temporary exemption “does not appear satisfactory to us” following the Council meeting in Brussels. He also called for EU leaders to follow three principles: to avoid a deleterious “trade war,” to protect and update the rules-based international order under the WTO, and to present a “united and determined” front going forward.

“If we are attacked, we will react without weakness, everyone should be aware of that, and I believe I can say that the American strategy is a bad approach to a real problem, which we have repeatedly discussed, that of dumping and overcapacity in sectors such as steel,” the French leader said.

Despite being excluded temporarily from the duties, the EU’s executive arm has launched on its own initiative a safeguard investigation into imported steel, arguing that cheap imports of the metal have already been overloading the European market – a situation that could worsen as a result of deflected trade that would otherwise have landed in the United States.

The investigation announcement, included in the Official Journal of the European Union, refers to import increases over the past five years and falling steel prices, stating that there is “sufficient evidence showing that the volume and the prices of these imports have caused or are threatening to cause significant overall impairment of the position of the Union industry.” 

It also warns that the market remains “fragile” and that even those steel products facing less risk remain “vulnerable to a further increase in imports, which is likely to be imminent given the context of an overall steel overcapacity, the increasing number of trade defence measures taken by third countries on steel products, and the recent Section 232 measures by the United States of America.”

The European Commission is due to decide on what actions to take, if any, based on the investigation’s findings within the next nine months, though this timeframe can be extended if necessary.

China requests WTO safeguard talks

In related news, China filed requests for consultations under the WTO’s Agreement on Safeguards this week, arguing that these US tariffs are “safeguard measures,” rather than national security ones. China has filed individual requests on steel and aluminium.

Both documents are dated 26 March and are virtually identical, aside from the product at issue and level of ad valorem tariff involved. The documents state that Beijing views the tariffs as being in violation of global trade rules, including the WTO’s Safeguards Agreement and the General Agreement on Tariffs and Trade (GATT).

Furthermore, the documents say that Beijing is looking to discuss possible compensation, given that WTO rules usually permit members to impose safeguards so long as they compensate exporting countries which are implicated by the measures.

Lastly, Beijing says that it “reserves the right to raise additional issues, make further factual and legal arguments, and pursue any other remedies” under WTO rules on safeguards or dispute settlement.

While China is responsible for only about two percent of imported steel into the North American country, it is still the world’s largest steel producer and ranks within the US’ top ten sources of foreign steel. It has also been a vocal critic of the duties, and released a list of 128 products from the US last week that could face tariffs as a result. This list is now subject to public comment, and officials from the Chinese Ministry of Commerce have called for continued discussions with Washington to address the issue.

“As the world's two largest economies, it is the only correct choice for China and the United States to cooperate with each other,” said a statement from a ministry spokesperson.

Tariff debate draws in WTO members

The Section 232 tariffs also took centre stage at WTO headquarters during a meeting of the Goods Council, which is the body that deals with goods trade as well as issues involving the organisation’s General Agreement on Tariffs and Trade (GATT).

Geneva trade officials familiar with the meeting confirmed that dozens of countries spoke about the tariffs, referring specifically to the systemic implications these types of unilateral measures could have. China and Russia had asked that the item be placed on the Goods Council agenda. Among those concerned were the EU, Australia, Japan, and Brazil, among a host of others.

WTO Director-General Roberto Azevêdo issued a public statement following the first half of the meeting, which began on Friday 23 March and concluded on Monday 26 March.

“I encourage members to continue working through the WTO's many forums and mechanisms to deal with their concerns and explore potential solutions. Actions taken outside these collective processes greatly increase the risk of escalation in a confrontation that will have no winners, and which could quickly lead to a less stable trading system,” said the WTO chief, without referring to the US measures specifically.

The two-day meeting also featured intense discussions over a separate US investigation into allegedly unfair Chinese intellectual property practices, particularly regarding forced technology transfers. That “Section 301” investigation, and the resulting actions, have similarly stoked fears that unilateral trade measures could have damaging implications for the global trading system.

Trump signed a presidential memo last week confirming plans to impose hefty tariffs on various products as a result, though the product list is still pending, along with indicating that investment restrictions could also be forthcoming. The US has now filed a related WTO case, arguing that China’s “discriminatory licensing requirements” have violated the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), such as its provisions on national treatment and patent rights for patent owners from abroad. (See Bridges Weekly, 22 March 2018)

At the Goods Council, China argued that the US was enacting a “very bad precedent” via the Section 301 action, arguing that Washington cannot “unilaterally” determine violations of global trade rules, as it appeared to do under this investigation. Beijing also urged fellow members to work together to “prevent the resurrection of 301 investigations and lock this beast back into the cage of the WTO rules,” according to a copy of the Chinese delegation’s statement seen by Bridges.

ICTSD reporting. 

This article is published under
29 March 2018
Seoul and Washington have reached an agreement “in principle” that would revise the Korea-US Free Trade Agreement (KORUS), South Korea’s trade ministry confirmed this week. The tentative agreement...
Share: 
12 April 2018
FISHERIES SUBSIDIES RULES AT THE WTO: A COMPILATION OF EVIDENCE AND ANALYSIS. By the International Centre for Trade and Sustainable Development (ICTSD). The papers in this compilation discuss the...
Share: