United States: U.S. Announcement Of Massive Tariffs On Steel And Aluminum

Threat of Global Trade War

Test of the National Security Exception

On Thursday, March 1, 2018, the Trump White House announced its decision to impose a 25% tariff on steel imports and a 10% tariff on aluminum imports, tying them to the national security and the objective of increasing the American production of these metals and rehiring workers in the plants that produce them.

The announcement comes on the heels of the February 16, 2018, U.S. Department of Commerce investigation report that found that the quantities and circumstances of steel and aluminum imports "threaten to impair the national security" of the United States as defined by Section 232 of the U.S. Trade Expansion Act of 1962. Canadian importers and exporters should be carefully reviewing their trade patterns and supply chains to mitigate the impact of these measures. Given the very high likelihood of retaliation by U.S. trading partners, the impact will extend well beyond the steel and aluminum industries.

Decades of experience have proven that such tariffs, while implemented to help protect a lagging domestic manufacturing industry, ultimately cause more harm than good. There are 80 times more U.S. workers employed in the steel and aluminum fabrication industry than in the production industry. The fabrication industry will be forced to use higher-cost inputs, whether they are imports subject to tariffs or domestic sales profiting from the tariff wall, and will pass on that increased cost to end users and consumers. The last time steel duties of this sort were levied by the George W. Bush administration, the duties resulted in a loss of over 200,000 jobs in the downstream industries that relied on steel.1 This was the job cost of protecting what was estimated to be, at most, 10,000 jobs.2

Moreover, while tariff levying may be attractive to states seeking a "quick fix" to perceived trade imbalances, it induces trading partners to take countermeasures against the levying country. Trade is stunted, the efficiencies which trade brings are lost, domestic consumer costs increase, and intergovernmental relations are strained. In the process of escalating tariffs and counter-tariffs, considerable uncertainty and disruption of supply chains are imposed on business deciders. The cost of tariffs is thus compounded by the costs associated with the uncertainty.

Further, as EU Trade Commissioner Cecilia Malmström has noted, global efforts to address the problem of Chinese overproduction of steel and other materials will be weakened.

Canada in the Cross-Hairs

The tariffs will have minimal impact on China, which has frequently been accused by the U.S. steel and aluminum industries, and by President Trump, of engaging in unfair competition. In June 2017, there were more than 20 trade remedies in effect against steel mill imports from China.3 Today, very little steel or aluminum imported into the United States comes from China, due to a series of product and country-specific tariffs introduced recently. In fact, China is not even in the top ten suppliers to the United States. However, Canada is an extremely important exporter of both metals to the United States, though the United States enjoys a considerable trade surplus in steel.

Canada will be the country most directly affected by this measure.According to the U.S. Department of Commerce, Canada is the largest source of steel and aluminum imports into the U.S. Canada alone represents 16% of steel imports.4 However, Canada is the largest buyer of U.S. steel, accounting for 50% of U.S. steel exports.5

The Canadian and U.S. steel industries are extensively integrated. Canada has stated that these trade restrictions would not only harm the industry on a North American basis, but would harm workers and manufacturers on both sides of the border. Canada and U.S. steel suppliers feed critical North American manufacturing supply chains, and those users will have considerable readjustment to consider if these tariffs are put into force.

It is curious that the Trump administration does not exclude its NAFTA partners from these measures. Indeed, various spokesmen have made clear that there is no question of exemption of any country, on the ground that exemptions for this country would mean even higher tariffs for the rest. In a Tweet, President Trump has indicated, though, that those partners could earn exemption if they grant the U.S. other concessions in the NAFTA negotiations.

Testing the National Security Exception – Do We Want to Go There?

It is highly likely that these new U.S. tariffs will be challenged by U.S. trading partners at the World Trade Organization (WTO). Given the legislative basis invoked for the tariffs, the United States can be expected to rely on Article XXI of the General Agreement on Tariffs and Trade 1994 (GATT 1994) which allows WTO members to impose measures, "which it considers necessary for the protection of its essential security interests... taken in time of war or other emergency in international relations".

There is some debate in international trade law circles whether this exception is entirely self-judging or whether its use is subject to WTO to ensure that it has been exercised in good faith and/or its conditions have been satisfied. It seems in this case highly debatable whether there is truly any national security concern.

Historically, the national security exception has rarely been relied up in trade disputes and it has never been litigated at the WTO. In 1975, Sweden used it to justify a global import quota on footwear (on the argument that the army needs boots). In 1985 and then in 1996, the United States used it to justify the trade embargo of Nicaragua and Helms-Burton measures regarding "confiscated property" in Cuba. One of the reasons for the historically limited recourse to Article XXI is the awareness among trading countries of the destructive impact that overuse of Article XXI would have on the rules-based world trading order.

That may be now changing as just within the last year or so it has come up in at least three trade disputes: China's new cybersecurity law, Ukrainian trade measures against Russia, and the economic boycott of Qatar by Bahrain, Saudi Arabia and United Arab Emirates. The implementation of the new U.S. tariffs on the basis of national security may encourage others to do so, and may also prompt WTO deciders to accept to review the merits of this basis.

The United States so far argues that it needs a reliable domestic supply of steel and aluminum for its tanks and warships, and that this justifies recourse to the exception for such broad measures that target allies such as Canada. Even leaving aside the fact that there is a domestic supply of just these commodities, and leaving aside also the Buy America provisions which favour that domestic supply. It is noteworthy that the primary voices against adopting these tariffs included the U.S. National Security Advisor and the Secretary of Defense. Secretary of Defense Mattis has been particularly strident, noting that he views Canadian steel and aluminum as a strategic asset of the U.S. Armed Forces.

Besides, the present factual matrix would provide a perfect WTO test case for clarifying that the invoked necessity must have at least an air of plausibility.6 This modified test would curb potential excesses, while retaining significant policy room for countries acting in their bona fide national security interests.

Given the facts, and the Tweets, it is difficult to see how the WTO could uphold these tariffs as bona fide national security measures and not as safeguards without making a mockery of the entire system.

The Prospect of Retaliation and Safeguard Action

Canada and the European Union have both expressed serious reservations concerning the proposed trade actions, and those reservations have come with warnings that the U.S. moves will necessarily bring reactions, raising the fear in many countries of a trade war depriving all economies of the efficiencies of free trade.

A successful challenge at the WTO would permit Canada, the EU and other trading partners to take retaliatory measures which can include tariffs, quotas or other restrictions on trade with the United States.

These need not be restricted to the steel and aluminum industries. Indeed, the EU has already threatened to impose tariffs on Kentucky bourbon, Harley-Davidson motorbikes, and Levi's jeans. Past threats of similar U.S. tariffs have brought retaliation in the form of barriers to such things as Florida orange juice and North Carolina textiles. Donald Trump has already provided his views through the semi-official channel of his Twitter account that the U.S. would counter-retaliate against any such tariffs by levying tariffs on European automobiles.

Implementation of the U.S. tariffs on steel and aluminum imports also raises the threat of diverting those imports to other markets including Canada and the EU. In this regard, the EU is considering imposing "safeguard" measures in reaction to the U.S. measures. WTO rules state that a member can take "safeguard" action to restrict imports of a product temporarily if a domestic industry is put at risk due to a significant rise in imports. This may result in the imposition of European tariffs and/or quotas on steel and aluminum imports.

Timing is also an important consideration when contemplating WTO-consistent retaliation. It can take 18 months or more before a WTO Panel and the Appellate Body make determinations regarding the offensive measures and proposed retaliation is approved.

To address the problem of delay, the EU is reportedly contemplating treating the US tariff measures as a safeguard thus enabling it to respond with retaliatory measures on an expedited basis as permitted under the WTO's Agreement on Safeguards. Under this approach, U.S. trading partners would refuse to recognize them as national security measures and labelling them as what they resemble, safeguard measures designed simply to protect designated U.S. industries. This could allow the EU, Canada and other countries to impose countermeasures within shorter delays foreseen by the WTO treaties.

Canada will not be able to sit patiently waiting for lengthy WTO proceedings to run their course or for the extraordinary U.S. tariffs to outlive their political usefulness to the Trump White House. Canada will feel considerable pressure to find ways of preserving, for example, the Canadian infrastructure market from U.S. steel which is itself tariff-protected against Canadian competition.

What Can Canadian Companies Do?

Canadian exporters of steel and aluminum to United States should be carefully reviewing the U.S. section 232 measures to determine whether their products fall within scope of the new tariffs.

All Canadian businesses who import or export should analyze their positions and buying and selling patterns, with a view to adjusting them to new tariffs or other restrictions which can arise on both sides of the Canada/U.S. border, and around the world. They would also be well advised to prepare to have their voices heard by Canadian federal and provincial governments in their choice, or renunciation, of retaliatory and market-protecting measures.


1 Source: Dr. Joseph Francois and Laura M. Baughman, The Unintended Consequences of U.S. Steel Import Tariffs: A Quantification of the Impact during 2002, Prepared for the CITAC Foundation, February 4, 2003.

2 Source: Gary Clyde Hufbauer and Ben Goodrich, Time for a Grand Bargain in Steel?, Peterson Institute for International Economics, January 2002.

3 Source : International Trade Administration, Global Steel Trade Monitor, December 2017.

4 "Steel Imports Report : United States", Global Steel Trade Monitor, U.S. Department of Commerce, International Trade Administration, December 2017.

5 Statement by Canada on steel and aluminum, Global Affairs Canada, March 1, 2018.

6 The WTO may attempt to reign in the view that the national security exception is an entirely true self-judging measure.This would be very similar to the position adopted by the Canadian International Trade Tribunal in interpreting similar exceptions in the context of government procurement. As found by the Tribunal, allowing a complete and unfettered right to the government to simply say that anything qualifies as a national security exception essentially renders the agreements themselves meaningless. As such, the exception must be read in light of the broader agreement in which it is situated.

To view original article, please click here.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
Torres Law, PLLC
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Torres Law, PLLC
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions