Trade Cases

'National Security' Tariffs: Who Is Really Hurt

March 5, 2018

The following article was written by trade attorney Lewis E. Leibowitz.

Whenever you hear someone say that a policy move is vital and trivial at the same time, watch your wallet. The Sunday talk shows today featured spokesmen and commentators debating the impact of steel and aluminum tariffs. Secretary of Commerce Wilbur Ross and National Trade Office Director Peter Navarro made the Sunday rounds today. They trivialized Wall Street losses, trade retaliation, diplomatic crises and hurting downstream metal using manufacturers. They argued that the steel and aluminum tariffs were critically important and at the same time arguing that downstream users would experience virtually no consequences. They talked about how much more a soup can would cost, how a car would cost “only” $175 more because of steel tariffs and so forth. These arguments were the same ones advanced in 2002 by Leo Gerard, then (and now) the President of the USW. He was wrong then and the White House is wrong now. A study I helped design and the Trade Partnership conducted found in 2003 that 200,000 jobs were lost in steel consuming industries, more jobs than then existed in steel production.

Lost in the shuffle are the folks that will truly be devastated by these tariffs, which were conveniently ignored by Secretary Ross and Dr. Navarro. First, there are those end users that CANNOT get steel or aluminum that meets their requirements from any domestic producer. Having heard for nearly four decades from domestic steel producers that they can make anything that their customers need (quality, delivery, consistency and specifications)—which was never the case and is certainly not the case now—there are literally thousands of businesses that are utterly dependent on imported steel and aluminum, and not because of price. They cannot get the specifications or the delivery they need to satisfy their customers.

Unfortunately, the administration’s “National Security” analysis has said nothing about the obligations of domestic producers, in exchange for such impressive relief, to actually make what domestic buyers need, including those who currently rely on imports. I continue to wait to hear this issue addressed—nothing yet.

Another group I worry about are the importers. They are actually legitimate business people, whose job it is to bring sellers and buyers together. In the 21^st Century, this layer in the distribution chain is vitally important. Many could be wiped out in the coming carnage.

Think first about importers who have purchased steel but will not receive it until after April 11. And, with President Trump’s advisors saying that the proclamation might be ready by week’s end, those importers exposed could be a lot more numerous. As a lawyer, I think about whether the surprise tariffs on such national security “threats” as Canada, France, Britain and Japan could create a condition of “force majeure” in sale contracts. This column does not offer legal advice—but traders and importers will be concerned about that, as will their customers.

End users that make products not filled with soup face a different problem from Campbell’s. Metal fabricators, who alone employ ten times the number of workers as “big steel,” will find that a 25% tariff will raise their costs by 20% or more, because 80% or more of metal stampers’ costs are in the metal they stamp. The consequences for these folks will be considerable.

These people and others (ports, longshoremen, truck and rail drivers, car buyers, dealers in capital equipment, tires and earthmoving machinery) will also want to know what their sacrifice has to do with “national security.” When we see proponents of tariffs showing pictures, we see airplanes and warships, tanks and howitzers. Do they really think that when we go to war we throw hot-rolled coils at the enemy? The companies that make weapons have a lot more to do with national security than metal producers. We can get the steel we need to defend the country by trading for it. Indeed, we have “Buy America” laws to steer the business to domestic firms already. We need to spend a little time thinking about people who make the products we actually fight with.

That forces me to conclude that this policy error (there is no other way to describe it) is not really about national security at all. It is about money and politics. When all is said and done, not much else seems to matter to those who control Washington these days.

Lewis Leibowitz

The Law Office of Lewis E. Leibowitz
1400 16^th Street, N.W.
Suite 350
Washington, D.C. 20036

Lewis Leibowitz will be participating in this year’s SMU Steel Summit Conference on Monday, Aug. 27. We intend on having an informal question and answer period for those arriving early for our conference. Mr. Leibowitz will answer your questions about Antidumping, Countervailing Duties, Circumvention, Section 337 and Section 232… For more information and access to registration, go to www.SteelMarketUpdate.com/events/steel-summit

Lewis Leibowitz

Lewis Leibowitz, owner of the Law Office of Lewis E. Leibowitz, practices in the areas of international trade law, customs law, and international commercial transactions. He represents clients before all federal courts and agencies dealing with international trade matters. Mr. Leibowitz advises and assists clients in diverse matters including trade remedies, customs, foreign-trade zones and free trade agreements, trade negotiations, and related matters. He can be reached at lewis.leibowitz@lellawoffice.com.