Insights

Tariffs on Steel, a Sign of Trade Wars on the Horizon

By: Olga Torres, Managing Member, Jonathan Creek, Associate
Date: 03/08/2018

On March 8, 2018, President Trump announced his decision to implement tariffs on steel and aluminum imports. These tariffs go into effect on March 23, 2018,[1] 15 days after President Trump’s announcement. These actions are in addition to numerous antidumping and countervailing duty actions successfully brought by U.S. domestic manufacturers of steel and aluminum products. The tariff rates are 25% against certain steel products and 10% against certain aluminum products. These rates will be added onto any pre-existing duty rates, including anti-dumping and countervailing duties. President Trump announced these tariffs will apply to imports of steel and aluminum products from all countries, although Canada and Mexico will be exempt for the time being. It is unknown how foreign countries will respond to the final tariff announcement, but the initial announcement on March 1, 2018 sparked global backlash with China, Canada, and the EU promising retaliatory tariffs, which could culminate in a trade war.

Steel and Aluminum Tariffs

President Trump’s decision to impose tariffs on steel and aluminum is predicated on an investigation conducted by the Department of Commerce (“DOC”) regarding the effect of imports of steel and aluminum products on U.S. national security. These Safeguard quotas and Safeguard duties recommended by the DOC are authorized by Section 232 of the Trade Expansion Act of 1962 against those products that the DOC determines threaten to impair the national security of the United States.[2]

Pursuant to the Section 232 investigation, the affected steel products include: carbon and alloy flat product; carbon and alloy long product; carbon and alloy pipe and tube products; carbon and alloy semi-finished products; and stainless products.[3] Similarly, the DOC Section 232 investigation targets the following aluminum products: unwrought aluminum; aluminum castings and forgings; aluminum plate, sheet strip, and foil; aluminum wire; aluminum bars, rods, and profiles; aluminum tubes and pipes; and aluminum tube and pipe fittings.[4]

Looming Trade Wars

The newly announced tariffs on steel and aluminum are the latest development in a recent line of decisions made by the Trump administration to close the trade deficit and remedy what the President deems “unfair” trade with China. On January 23, 2018, President Trump issued his final Presidential Proclamation regarding a Safeguard Order on solar panels. This order was meant to reduce the importation of certain solar panel products and bolster the production of such products in America. This solar panels Safeguard Order came in the wake of previously introduced legislation aiming to restrict foreign investment in the United States in the name of national security, particularly investment from China.[5]

The most recent development on steel and aluminum tariffs has elicited almost entirely negative reactions from various leaders around the world. Leaders in Canada, China, and the EU have condemned the tariffs, and promised retaliatory tariffs of their own. China has stated it will decrease the amount of agricultural products it imports from the U.S., as well as implement tariffs of its own. Additionally, the EU has stated it will consider imposing tariffs on a number of American products including orange juice, jeans, motorcycles, bourbon, cranberries, and steel. Meanwhile, President Trump has stated he will consider tariffs on European automobiles if the EU imposes tariffs of its own.

In the final announcement, President Trump stated Canada and Mexico will be exempt from these tariffs. These exemptions will go into effect immediately; however, if the three countries are unable to re-negotiate the North American Free Trade Agreement (“NAFTA”), then Canada and Mexico will likely be subject to the tariffs. Additionally, the President has stated he is open to modifying or removing tariffs on individual countries. In mentioning potential exemptions, the President specifically mentioned Australia as a country he would consider granting an exemption to.

What Can Companies Do to Prepare?

U.S. importers impacted by the new tariffs should consider applying for an exclusion from the steel and aluminum Safeguard Order. The exact requirements for obtaining an exclusion have not been provided at this time, but once President Trump issues his final Presidential Proclamation, importers can expect a deadline date for exclusions to be set shortly thereafter. In the recent Safeguard Order for solar panels, the President issued his Presidential Proclamation on January 23, 2018, and the deadline for applying for exclusions was set for March 16, 2018. In the case of solar panels, importers were required to distinguish the product for which they were seeking an exclusion from the products included in the Safeguard measures. Generally, an exclusion can be provided where the imported product is not made in the U.S., domestic producers do not have the capacity to ship sufficient amounts, or if there is a specific national security need.

While President Trump’s decision has been made, the tariff announcement is a situation worth monitoring because there is the potential for more countries to be exempted as well as for countries to retaliate with tariffs of their own. Torres Law will continue to monitor updates related to the steel and aluminum tariffs. If you or your company require any assistance, please feel free to contact us.

 

[1] In our initial publication of the article, we had a typographical error and stated the effective date was March 16. The correct date is March 23, 2018.

[2] Bureau of Industry and Security, Section 232 Investigations: The Effect of Imports on the National Security, https://www.bis.doc.gov/index.php/other-areas/office-of-technology-evaluation-ote/section-232-investigations (last visited Mar. 7, 2018).

[3] Department of Commerce, Section 232, The Effect of Imports of Steel on The National Security, https://www.commerce.gov/sites/commerce.gov/files/the_effect_of_imports_of_steel_on_the_national_security_-_with_redactions_-_20180111.pdf (last visited Mar. 7, 2018).

[4] Department of Commerce, Section 232, The Effects of Imports of Aluminum on the National Security, https://www.commerce.gov/sites/commerce.gov/files/the_effect_of_imports_of_aluminum_on_the_national_security_-_with_redactions_-_20180117.pdf (last visited Mar. 7, 2018).

[5] For more information on this proposed legislation, please see the previously published Torres Law article, 2018 Trends for CFIUS Reviews, at http://www.torrestradelaw.com/posts/2018-Trends-for-CFIUS-Reviews/137.

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