Trade Cases

Leibowitz on Trade: Strong Reaction to Tariffs

Written by Tim Triplett

Lewis Leibowitz, trade attorney and contributor to Steel Market Update, offers the following update on trade events in Washington:

As briefly stated by the Trade Commissioner of the European Union, Cecilia Malmstrom, “Today is a bad day for world trade.” Malmstrom was referring to the announcement by President Trump that the 25 percent tariffs on steel and 10 percent tariffs on aluminum will apply at midnight tonight on covered products from the EU, Canada and Mexico.

All countries promised retaliation on U.S. exports to their countries, as is permitted by WTO rules, if their interpretation of those rules is correct. Only litigation at the WTO in Geneva will settle those issues. Here’s a summary of the situation as of today:

Quotas on Argentina and Brazil. The forthcoming Annex to today’s proclamation by the president will detail the quotas applicable to Argentina and Brazil. Korean quotas are already in place. The quotas on Argentina and Brazil, like those on South Korean steel, are retroactive to Jan. 1, 2018. Therefore, some quota categories may be filled for the year, or at least for the current calendar quarter, which ends June 30. Also, similar to South Korea, any shipments in excess of the annual or quarterly quota (30 percent of the annual quota per quarter) will not be allowed entry into the United States. There are many questions about the details of these agreements, including eligibility for non-consumption entry to the United States and the effect of product exclusions (should the Commerce Department approve any) on quota levels.

Australia. Today’s proclamation states that, because of agreement on a range of measures, Argentina, Australia and Brazil will continue to be exempt from tariffs on steel. The aluminum proclamation excludes only Argentina and Australia. However, the implementing language does not impose any quantitative limits on Australia—only Argentina and Brazil for steel, and only Argentina for aluminum. Australia appears to be exempt from quotas and tariffs on steel and aluminum. Perhaps this was a mistake, but that is what the proclamations provide. News reports erroneously included Australia as having agreed to limit shipments to the United States—perhaps they have, but they are not subject to quotas, according to the proclamation.

Market Reaction. Major trading partners, including Canada, Mexico and the EU, have announced plans to retaliate against “illegal” U.S. tariffs. The amounts are likely to be substantial. Steel products themselves are likely to pay heavily for this. Lost in the noise about U.S. tariffs is the fact that U.S. steel exports to Canada and Mexico are greater than U.S. steel imports from those countries. U.S. steel imports (Harmonized Tariff Schedule Chapter 72) from Canada and Mexico in 2017 totaled $6.9 billion, while exports to those countries totaled nearly $9 billion. The EU trade situation is different, but steel exports to the EU are still substantial ($1.1 billion of U.S. exports compared to $5.3 billion of U.S. imports).

NAFTA. Commerce announced that Canada and Mexico would face tariffs, not because of U.S. national security but because the NAFTA 2.0 negotiations were not going as well or as quickly as hoped. Commerce appears to believe these negotiations will continue as before despite the new steel and aluminum tariffs. Canada and Mexico disagree.

Automotive Tariffs. The Trade Partnership released a new study predicting that 25 percent tariffs on autos and auto parts under the new Section 232 investigation would result in three times as many jobs being lost as gained in the U.S. economy. This unsurprising result does not seem to deter Commerce and the White House. 

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

Phone: (202) 776-1142
Fax: (202) 861-2924
Cell: (202) 250-1551

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