Trade Cases

World Ready to Retaliate Against Section 232

Written by Sandy Williams

The possible forthcoming Section 232 decisions on steel and aluminum imports have alarmed nations across the globe. Commerce Secretary Wilbur Ross said he “wouldn’t be surprised if there were retaliations to the measures,” but perhaps he underestimated the negative response to his recommendations.

Numerous countries have expressed concern for their own domestic markets, while others vowed swift retaliation against the U.S. if stiff restrictions are applied to imports.

South Korea’s ruling Democratic party reacted strongly to the Section 232 proposal, vowing retaliatory action, said news outlet Yonhap. The government is especially concerned with the impact on Korea’s steel pipe industry.

“We have to look closely into whether a series of U.S. measures to strengthen trade barriers are not in violation of World Trade Organization rules, and we should actively consider corresponding retaliatory measures,” said Rep. Woo Won-shik.

“The U.S. trade pressure has crossed the line,” said Rep. Hong Ihk-pyo. “We also have to strengthen quarantine inspections on agricultural and livestock products. I think we can take considerable measures against American agricultural and livestock products.”

South Korea is currently taking action with the WTO over a dispute on AD/CVD measures on steel products and transformers and said it will litigate on washing machines and solar products if bilaterial negotiations are unsatisfactory.

China, as usual, was cited by many as the source of import problems because of its huge steel industry. The Commerce of Ministry warned that it will “take necessary measures to protect our rights.”

“The spectrum of national security is very broad. Without a clear definition, it could easily be abused. If every country followed the U.S. on this, it would have serious ramifications on the international trade order,” said Wang Hejun, a senior official at China’s Commerce Ministry.

The U.S. agriculture sector is especially concerned about retaliation from China in the form of tariffs on soybeans and other large agricultural exports.

Russia said it will challenge any proposed Section 232 tariffs of 53 percent for steel and 23.5 percent for aluminum, charging that they would make it difficult for Russian companies to find alternative markets.

Australia will plead for exemption from measures imposed under Section 232 claiming it will cause harm to Rio Tinto’s aluminum smelters and BlueScope Steel’s subsidiary Steelscape.

Japan said proposed tariffs and quotas are a violation of the principles of free trade. “As we have repeatedly said before, Japan believes any steel and aluminum imports by the U.S. from Japan do not pose any threat to the U.S. national security,” said Yasuji Komiyama, director of the metal industries division of Japan’s Ministry of Economy, Trade and Industry.

“The recommendations violate the principles of free trade, which are the foundation for development and prosperity of the global economy,” Japan Iron and Steel Federation Chairman Kosei Shindo said in a statement.

The president of Japan’s second largest steelmaker, JFE Holdings, said retaliation is possible. “If the U.S. takes action (to curb imports), it may trigger retaliation by other countries,” said Eiji Hayashida. “What is most troublesome is to see the world heading to protectionism.”

A Nippon Steel executive said U.S. trade action would flood Asia with steel products that have nowhere else to go.

European Commission spokesman Margaritis Schinas said that the EU would be “deeply concerned” by any sanctions hitting EU businesses. “We would be taking appropriate measures to defend EU industry, and we stand ready to react swiftly and appropriately in case our exports are affected by any restrictive trade measures from the United States,” said Schinas.

Orange juice, bourbon and Harley Davidson motorcycles were among the items suggested by a German newspaper as retaliatory targets if the U.S. restricts imports of aluminum and steel.

“We do not share the view that European or even German steel imports can threaten U.S. national security. This is why there is no reason to impose unilateral restrictions on steel imports,” said German Economic Affairs and Energy Minister Brigitte Zypries in an interview to German newspaper Welt am Sonntag.

EUROFER Director General Axel Eggert warned, “The EU has an arsenal of trade remedies and safeguards available to defend its interests. These can be ready to launch in very short order in response to an economic threat, and EU industry will demand their immediate application.”

Exporters in Turkey said the fate of global steel trade is in the hands of the U.S. Trade retaliation by Turkey is likely, said the Turkish steel exporters association CIB. “It seems that if the U.S., which is [the] the world’s largest steel importer, will build barriers…to preserve the domestic steel sector, global trade balance will be destroyed,” said CIB Chairman Namik Ekinci. Ekinci added Turkey could reduce its steel imports and scrap imports from the U.S, depending on the Section 232 outcome.

Mexico steel producers called for reciprocal sanctions against the United States if Section 232 measures are imposed. Mexican steel association CANACERO said in a statement, “We respectfully exhort the Mexican government to evaluate measures of reciprocity that Mexico could take in case of being included in this measure, as well as to communicate formally to its U.S. counterparts the serious implications that this type of restriction would have for the region, especially during the negotiation of NAFTA.”

In Canada, steel and aluminum producers are hoping for exemptions from any Section 232 actions and stressed the importance of the sectors to the United States. Canada would be excluded in the 53 percent tariff that targets specific countries, but would be included in a blanket measure. Canadian government spokesman Adam Austen noted that Canada buys more U.S. steel than the rest of the world combined. “We will continue to vigorously represent Canadians’ interests with the U.S,” he said.

“Certainly, any amount of poison being injected by the system makes it a lot more difficult to have a healthy continental economy afterward,” Perrin Beatty, head of the Canadian Chamber of Commerce, told the Toronto Star. “Everyone loses” if those recommendations are put in place, he said.  

South Africa says a tariff on steel imports to the U.S. could decrease local steel production that is struggling to stabilize. South African steel production rose 2.6 percent in 2017 to 5.3 million tons after dropping 4.2 percent in 2015, according to the World Steel Association. Last year, the country imposed a three-year safeguard tariff on imports of hot rolled steel products to protect its industry from unfair subsidies distorting competition.

“The latest developments have the potential of further dampening production in the local steel industry, reducing steel exports to the U.S., squeezing margins and depriving the steel industry of much-needed foreign reserves,” Steel and Engineering Industries Federation of Southern Africa (SEIFSA) chief economist Michael Ade said in statement.

Ade said he feared that widespread protectionism of steel products might lead to trade wars and further price spikes in the raw materials used in everything from auto manufacturing to household appliances and construction. Of particular concern, said Ade, has been the high uncertainty in steel production and imported inputs cost, which is sensitive to exchange rate volatility.

Funding for More 232 Investigations

Although steel and aluminum are the targets in the current Section 232 investigations, other imported products may soon be scrutinized for threats to U.S. national security. Commerce requested additional funding in its budget justification report to create teams that will conduct future Section 232 investigations. These investigations may be requested by industry sectors, agency heads or self-initiated by the Secretary of Commerce.

“For example, the President’s National Security Strategy calls for systematic evaluation of the U.S. Defense Industrial Base and the related supply chain essential to national security, with a focus on future investments and workforce skills,” states the budget report.

Commerce is requesting $4.8 million for 28 new positions within the Bureau of Industry and Security and the International Trade Administration to support investigation, enforcement and administration of cases.

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