Trade Cases

Section 232 Tariffs Cause Turmoil

Written by Sandy Williams

Commerce Secretary Wilbur Ross has made it official—there will be no tariff exemptions for Canada, Mexico, and the European Union.

In a briefing on Thursday, Ross said the tariffs of 25 percent on imports of steel and 10 percent on imports of aluminum will go into effect at midnight. Argentina, Brazil, Australia and South Korea have agreed to voluntary quotas and are excluded from the tariffs.

“The president’s overwhelming objective is to reduce our trade deficit,” Ross said. “We believe this combined package achieves the original objectives that we had set out, which was mainly to constrict the import of steel and aluminum.”       

“As to Canada and Mexico, you will recall that the reason for the deferral had been pending the outcome of the NAFTA talks,” said Ross. “Those talks are taking longer than we had hoped. There is no longer a very precise date when they may be concluded,” so the two countries were added to the tariff list, he said.

If Canada and Mexico choose to take retaliatory measures, it will not affect the ability to keep renegotiating NAFTA as a separate track, he added. “If any of these parties does retaliate, that does not mean there cannot be continuing negotiations,” Ross said. “They’re not mutually exclusive behaviors.”

In an amended proclamation posted by the White House on May 31, President Trump said no other countries would be exempted at this time. “It is necessary and appropriate, at this time, to maintain the current tariff level as it applies to other countries.”

Retaliation to Tariff Measures

U.S. allies vowed to implement retaliatory measures against the tariffs. Mexico responded by imposing “equivalent” tariffs on imports from the U.S. of flat steel, lamps, pork legs, blueberries, apples, grapes, cheeses and other products. 

Canada Prime Minister Justin Trudeau announced retaliatory measures representing the total value of 2017 exports affected by the U.S. measures—$12.8 billion. There are two lists of products: one for 25 percent tariffs and the other for 10 percent. The measures will include tariffs on imports of steel and aluminum, as well as whiskey, orange juice and other food products.

Said Trudeau, “I want to be very clear about one thing, Americans remain our partners, our allies and our friends. This is not about the American people. We have to believe that at some point common sense will prevail, but we see no sign of that in this action today by the U.S administration.”

Ontario Premier Kathleen Wynne had strong words for Trump during a provincial campaign speech. Wynn called the tariffs short-sighted and urged Trudeau “to take the strongest retaliation possible to protect our workers.”

“I think that we’ve all had just about enough of Donald Trump…. He doesn’t seem to get that his bluster and his bullying are costing people real jobs—in his own country, in Canada and in Ontario,” Wynne said. “I really believe that now the time for talk is done. Donald Trump is a bully and the only way to deal with a bully is to stand up and push back, and we have to do that.”

“Today is a bad day for world trade,” said EU Trade Commissioner Cecilia Malmström.

European Commission President Jean-Claude Juncker reiterated the EU’s belief that the tariffs are unjustified and at odds with World Trade Organization rules. “This is protectionism, pure and simple,” he said, noting that the real problem is overcapacity in the steel sector.

“By targeting those who are not responsible for overcapacities, the U.S. is playing into the hands of those who are responsible for the problem,” he added. “The U.S. now leaves us with no choice but to proceed with a WTO dispute settlement case and with the imposition of additional duties on a number of imports from the U.S. We will defend the Union’s interests, in full compliance with international trade law.

The EU plans to move forward with tariffs from a previously released list of U.S. products that include Harley-Davidson motorcycles, Kentucky Bourbon, denim, cigarettes, cranberry juice and peanut butter. 

Adding to the furor today was last week’s announcement that Trump will go after tariffs on imported automobiles and auto parts, justifying them as a threat to national security again using Section 232 measures. 

Congressional Opposition

Republicans, normally a bastion for free trade, blasted Trump’s decision to refuse exemption to the United States’ closest allies. 

Sen. Ben Sasse (R-Neb) lambasted the decision. “This is dumb. Europe, Canada and Mexico are not China, and you don’t treat allies the same way you treat opponents. We’ve been down this road before—blanket protectionism is a big part of why America had a Great Depression. ‘Make America Great Again’ shouldn’t mean ‘make America 1929 again.’”

Sen. Orrin Hatch (R-Utah) called the tariffs “a tax hike on Americans” and Sen. Jeff Flake (R-AZ) tweeted on Thursday that “trade wars do not end well.”

Industry Support

Not everyone was unhappy with the Section 232 decision, however.

U.S. Steel said in a statement: “We welcome the president’s strong Section 232 action announced today, as steel imports have continued to pour into U.S. markets over the first five months of the year. Unfairly traded imports from around the world have harmed our domestic steelmaking capacity. This action will restore jobs and restart idled steelmaking facilities to support our country’s long-term ability to produce steel, a critical component to our national and economic security.”

“Nucor is pleased the Trump administration is honoring its June 1 deadline to fully implement the Section 232 tariffs on steel imports and end the temporary exemptions first put in place in March,” said John Ferriola, Chairman, CEO and President, Nucor Corp. “Broad-based tariffs are needed to address the massive flood of dumped and illegally subsidized steel imports into the United States that threaten our national defense and economic security. Strong and comprehensive action is needed to achieve the administration’s goal to reduce imports by 37 percent to achieve at least 80 percent U.S. capacity utilization rate, the minimum needed for the industry’s long-term financial health and viability.”

The American Iron and Steel Institute gave its full support to the administration’s position: “On behalf of the U.S. producers of AISI, we thank the president for his actions to ensure a strong American steel sector that is fundamental to our national and economic security,” said AISI President Thomas J. Gibson. “The U.S. producers of AISI fully support the administration’s position that any country that is granted an exemption from the tariffs must be subject to a quota in order to safeguard against the exempt country becoming a conduit for trade diversion, transshipment and import surges.”

Gibson continued, “The president’s trade actions have already begun putting steel workers back to work in Ohio and Illinois, and we are grateful for the administration’s commitment to the nearly two million jobs supported by the domestic steel industry.”

Steel Manufacturers Association President Philip Bell commented, “We support President Trump’s objectives under Section 232 to remove the threat that steel import surges pose to our national security and restore the domestic steel industry to health. We understand negotiations for Section 232 agreements with our major trading partners are far from over and we urge the administration to conclude implementation of effective, appropriate Section 232 measures as soon as possible.” 

Alliance for American Manufacturing President Scott Paul applauded the trade strategy, but expressed concern regarding the product exclusion process: “There is evidence the Section 232 strategy is working as the Trump administration moves ahead with its steel and aluminum trade actions. American smelters and steel mills are reopening, which means more jobs and added capacity. And more pressure is being applied by our allies to China on steel dumping and overcapacity.

“Looking ahead, the product exclusion process must be reasonable, and narrow enough so that it does not undermine the intent of the relief. The goals of restoring American industries to a sustainable operating domestic capacity and protecting national security must remain paramount.”

Industry Opposition

The United Steel Workers support Section 232 action, but expressed their disappointment that Canada was not given a tariff exemption. “This decision is unacceptable and calls into serious question the design and direction of the administration’s trade policy. Section 232 relief is founded on national security interests and U.S. law. Our history shows there is no stronger ally and partner on national security than Canada.

“In the coming days, we hope the administration will reassess its decision so we can resume a path toward correcting the trade violations of the past. So far, the administration’s trade policies have led to confusion, higher trade deficits and no real success in changing the practices of our trading partners. Ultimately, the goal is not a tariff barrier, but a stronger America. It’s time to ensure that we’re on the right path.”

Richard Chriss, President of the American Institute for International Steel, and Paul Nathanson, spokesperson for the Coalition of American Metal Manufacturers and Users commented: “We are deeply disappointed that the Trump administration has decided to move forward with imposing steel and aluminum tariffs on the EU, Canada and Mexico. Make no mistake: restricting the raw material supply in the U.S. and imposing tariffs on imports from our closest trading partners places American manufacturers directly in harm’s way. The pain will by no means be limited to the manufacturing sector; a slew of other U.S.-made products will soon be penalized with retaliatory tariffs by our major export trading partners. 

“This trade war will negatively impact manufacturing workers who have benefited from the other pro-manufacturing policies already implemented by the Trump administration–and in most cases more than undoing growth generated from the tax cuts enacted late last year. Plans by U.S. manufacturers to expand will be put on hold indefinitely. Companies will be forced into difficult choices about technology, investment and jobs. We urge President Trump to change course now to protect and sustain millions of U.S. manufacturing jobs.”

Latest in Trade Cases