Steel tariffs: the beginnings of a trade war?

Mike Court examines the effect of President Trump’s steel tariffs

Most US steel imports come from Canada, Brazil and South Korea. President Trump says the steel problem is of Chinese origin, so what is the connection?

In 2005, China produced nearly a third of the world’s steel. By 2017, it was nearly half the global supply, but a slowdown in the Chinese economy has led to a shelving or slow-down of many domestic construction projects. The price of metal has fallen for the last five years as the surplus Chinese steel has found its way onto the world markets.

Following weeks of speculation, President Trump signed two orders affecting both steel and aluminium on 8th March.

Mexico, China and the EU have all said they will consider punitive tit-for-tat tariffs on some US products. The EU has already identified Kentucky bourbon and dairy products from Wisconsin, products that are highly significant as they are also the homes to some of the highest-ranking members of the US Congress.

The tariffs come into force from 23/03/18. An additional 25% duty on steel, plus an additional 10% duty on aluminium that is imported from all countries except Canada and Mexico. The new order is contained in Section 232.

There may yet be some exclusions for particular steel and aluminium products. There is also a possibility of further exemptions with US allies regarding country exemptions.

Will US based manufacturers now seek alternative product exclusions for their products?

Across the globe, buyers are threatening to take action against US products. Motorbike brand Harley Davidson, orange juice, Levi Jeans and many others may find increased duties placed on upon them.

The detail:

Steel: the 25% additional duty will apply to “steel articles” imported from all countries except Canada and Mexico

Steel articles” are defined under tariff codes;

  • 7206.10-50
  • 7216.50-99
  • 7301.10
  • 7302.10
  • 7302.40-90
  • 7306.90

The 25% additional duty will apply to those articles entered or withdrawn from warehouse for use as from 23/03/2018.

 

Aluminium: the 10% additional duty will apply to “aluminium articles” imported from all countries except Canada and Mexico

Aluminium articles” are defined by tariff codes;

  • 7601 Unwrought aluminium
  • 7602 Aluminium bars, rods and profiles
  • 7603 Aluminium wire
  • 7606/7607 Aluminium plate,sheet,strip,foil, flat rolled
  • 7606/7607 aluminium tubes, pipes,tube and pipe fittings
  • 7608,7609 castings and forgings
  • 7619.99.51.60 and 7616.99.51.70

The 10% additional duty applies from 23/03/2018.

 

The Canadian/Mexican exemptions are in place as discussions on a new NAFTA agreement are ongoing. Possible further country exemptions are believed to be with countries who have “a security relationship” e.g. allies such as the EU, Japan and Korea.

Product exclusions will be down to the Department of Commerce and will be based on sufficiency and security. All businesses that utilise steel or aluminium in their products are expected to be affected.

It is clear that while the US tariffs won’t cause the surplus steel to go away, industry throughout the world will be watching with interest. These US tariffs could cause some issues in their re-negotiations of the NAFTA and South Korean trade talks, plus a potential trade war could put the future of many industries into difficulties.

Further reading:

Financial Times: No exemptions for Donald Trump’s US steel tariffs

CNBC: If Trump thinks he’s taking steel tariff war to China, he’s wrong. That war is already over

 

 

Mike is International Trade Compliance Specialist for International Trade Matters Ltd