Broad Tariffs on Foreign Steel, Aluminum Coming, Trump Announces
The U.S. will impose a 25 percent duty on all foreign steel and a 10 percent duty on imported aluminum, President Donald Trump announced March 1. "It'll be for a long period of time. We’ll be signing it next week. And you’ll have protection for a long time in a while. What's been allowed to go on for decades is disgraceful."
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Steel executives such as U.S. Steel CEO Dave Burritt have pushed the president for tariffs to tackle Chinese overproduction and transshipment to get around antidumping duties. "We are not protectionists. We want a level playing field," Burritt told reporters who were allowed in at the end of an industry meeting with steel and aluminum executives. The Aluminum Association, which had previously said it opposed global tariffs to help its smelters, said it looks forward to working with the president on implementation. Thomas Gibson, CEO of the American Iron and Steel Institute, thanked the president for "following through on his commitment to addressing the steel crisis" He said the fact that 27 percent of steel consumption in America is supplied from imports means idled steel plants and the loss of thousands of jobs.
The European Commission reacted strongly, saying the action will damage trans-Atlantic relations. "Protectionism cannot be the answer to our common problem in the steel sector," European Commission President Jean-Claude Juncker said, alluding to Chinese overproduction. "We will not sit idly while our industry is hit with unfair measures that put thousands of European jobs at risk. The Commission will bring forward in the next few days a proposal for WTO-compatible countermeasures against the US to rebalance the situation."
Philip Levy, formerly a senior economist during the George W. Bush administration, said until now, Republicans in Congress who believe in free trade have operated under the philosophy of "give the president the benefit of the doubt, work behind closed doors, see if you can nudge him." Now, with the announcement that Trump will sign documents next week on the tariffs, Levy said, "the nudging doesn’t work."
This raises the question of how Republican majorities in Congress will treat the administration on trade in coming months. The U.S. trade representative cannot continue to negotiate NAFTA if Congress does not renew trade promotion authority, or fast-track authority. Levy said that "if you had asked me a few days ago, I would’ve said 'well of course they’re going to renew TPA.' Steel tariffs -- that changes the game a bit." Of Congressional leadership, he said, "they’re going to have to figure out a strategy."
Finance Committee Chairman Orrin Hatch issued a statement saying that tariffs on the metals "are a tax hike the American people don't need and can't afford." Trade groups that represent buyers of the metals also complained the action will be a jobs killer. Sen. Sherrod Brown, D-Ohio, praised the president. "This welcome action is long overdue for shuttered steel plants across Ohio and steelworkers who live in fear that their jobs will be the next victims of Chinese cheating," his statement said. Sen. Bob Casey, D-Pa., also praised the action. Trump won the majority of votes in both states.
Because Trump is planning global, not targeted, tariffs, Canada -- the largest exporter of aluminum to the U.S. -- will be hit, unless someone convinces Trump to give them an exemption. "There's debate going on within the administration on whether to exclude Canada, and to exclude other allies," said Sean Ehrlich, associate professor of Political Science at Florida State University and author of the book Politics of Fair Trade.
"It will be interesting to see what this does to NAFTA negotiations," Levy said. "Bush, he exempted Mexico and Canada" when he implemented tariffs 15 years ago to protect steelmakers. "Do they press a dispute under NAFTA?"
The European Union and China have already vowed retaliation, Levy noted, and he said they are likely to target exports such as Kentucky bourbon in the hopes of bringing pressure on Senate Majority Leader Mitch McConnell. McConnell did not respond to a shouted question on the tariffs at the Capitol March 1.
Ehrlich expects China will impose barriers to U.S. soy exports, which is more economically significant than bourbon. The EU will wait until the World Trade Organization acts, he said. Ehrlich, a political science professor at Florida State University, said there's no track record of 232 cases at that body.
"I don't think anyone can confidently predict what the WTO might do on this," he said. But, he said, if the official rollout does exceed the Commerce Department's justification -- which had called for 24 percent tariffs on steel and 7.7 percent on aluminum -- that will not be helpful to the U.S. cause.