The President’s announcement yesterday to impose a 25% tariff on steel, and 10% tariff on aluminum imports, has left his advisers divided on implementation. Overseas trading partners are also contemplating retaliation on U.S. exports. The tariffs will impact production costs for U.S. producers, and potentially result in offshore production for items that include steel and aluminum.
The President’s announcement comes after the Dept. of Commerce issued reports on Feb. 16, 2018 recommending the imposition of protective trade measures based on its conclusion that import volumes of steel and aluminum pose a threat to domestic industry. The agency’s proposed countermeasures included a range of alternatives, including the imposition of additional duties on top of current tariff rates already in effect for these commodities. The Commerce investigation was conducted pursuant to Section 232 of the 1962 Trade Expansion Act which allows the agency to investigate the effects of imports upon national security.
IMPLEMENTATION REMAINS UNCLEAR
It has been widely reported that the announcement caught Trump advisers and policy staffers off-guard. The issuance of a formal Presidential proclamation setting forth the additional duties may take several more weeks. Although the President had announced that the additional duties would be global in nature, many had hoped for country or product-based exclusions based on comments received by industry and trading partners. Whether any exemptions are granted remains unclear until the actual proclamation is issued.
DOMESTIC IMPACT
Several industry groups have warned the Administration and the Dept. of Commerce that the duties are overly broad and will have a severe detrimental impact on downstream users of steel and aluminum. Data has been presented to show that additional duties will significantly raise input costs for industries that use these products. Such costs will impact reinvestment into their operations, and will likely result in more downstream products containing aluminum and steel being imported. Among the U.S. industrial sectors that will be hardest hit include: the automotive sector; aerospace; heavy equipment; and construction.
OVERSEAS RETALIATION
Since the recent announcement was made, international condemnation has been uniformly reported with the potential for significant consequences to U.S. traders. For example, since the duties would be applied globally, both Canada and Mexico would be subject leaving the effect on the currently tenuous NAFTA re-negotiations uncertain. Canada is the largest exporter of aluminum to the U.S.
China has also recently threatened potential retaliation against U.S. exports of airplanes, sorghum, and soybeans.
The European Commission has reacted strongly to the tariffs saying that it will certainly damage relations, and it will not sit by while its industries are hit with unfair trade measures. The EU has indicated that it will work with the World Trade Organization to issue countermeasures in response to any assessments made. U.S. exporters will squarely face the consequences of additional retaliatory duties as we move forward.
Should you have questions concerning whether your steel or aluminum imports may be covered by the proposed duties, or if you wish to be placed on a watch list for retaliatory duties, please contact one of the Rock Trade Law or trade professionals listed here.