United States: Trump Administration Imposes Steel And Aluminum Tariffs

What You Need to Know

  • New Steel tariffs of 25 percent cover essentially all steel mill products from all countries, except Canada and Mexico.
  • New Aluminum tariffs of 10 percent cover essentially all aluminum products from all countries except Canada and Mexico.
  • Duties go into effect on March 23.
  • USTR will hold discussions with other countries to consider exempting additional countries.
  • US companies that rely on imports may request that products not available from US producers be excluded from the tariffs.

Background

On March 8, 2018, the Trump Administration officially announced substantial additional tariffs on steel and aluminum imports.  The tariffs are imposed pursuant to Section 232 of the 1962 Trade Expansion Act. Section 232 gives the President broad powers to impose trade restrictions and take other measures for purposes of securing national security.  Historically, Section 232 has been invoked only rarely and for limited purposes.  Prior to the launch of steel and aluminum investigations last year, the last time the US government considered imposing trade restrictions under Section 232 was in 2001.

The Presidential Proclamation on steel imposes new tariffs of 25 percent on steel imports.  With very few exceptions, the new tariffs will apply to essentially all steel mill products, from all countries except Canada and Mexico.  New tariffs of 10 percent will also be imposed on aluminum imports. Like the steel proclamation, the Aluminum proclamation covers essentially all aluminum products from all countries except Canada and Mexico.  The new duties will take effect at 12:01 am on March 23, 2018.

Country Exemptions

The President announced that imports from Canada and Mexico are exempted from the tariffs due to the close trade and security relationships with those countries.  However, the President also made clear that the exemption might be temporary, pending further North American Free Trade Agreement negotiations.  In addition, the President has announced his willingness to conduct discussions with other countries to determine if additional countries should be exempted from the new tariffs. The proclamations state that country exemptions will be considered for countries with which the US has a security relationship.

Product Exclusions

US companies that rely on imported steel or aluminum for US operations will be eligible to request that certain products be excluded from the tariffs.  Exclusions may be provided for products that are not available in adequate quantity or quality from US producers.  In some circumstances, a tariff exclusion may also be available for imports that serve national security purposes.  Companies interested in exclusions should not wait to consider possible exclusions as the window for such requests will be short and the request will require detailed and specific supporting information.  Support from customers, as well as other stakeholders will also be critical to exclusion requests. 

Retaliation Risk

Major trading partners such as the European Union (EU) have already announced their intention to impose countermeasures.  Countries may bring challenges before the World Trade Organization (WTO).  However, it also appears likely that countermeasures will be imposed more quickly by key trading partners.  Countermeasures will likely be imposed on US exports of politically sensitive products, including agricultural exports and exports from states that are home to influential congressional leaders.  The EU has announced that it will target Bourbon from Kentucky and Harley-Davidson motorcycles from Wisconsin, among other key products.  China has hinted that it may target US exports of coal that supply its steel industry.

The broad use of Section 232 by the United States may also prompt other countries to impose trade barriers in the name of national security.  Such measures may target US agricultural products and other key export sectors.

More Section 232 Actions on the Way?

Commerce has requested a budget increase to support additional national security investigations under Section 232. The Commerce request predicts initiation of additional Section 232 investigations based on both industry petitions and self-initiation by the US government. The tariff issue does not break along traditional party line affiliations in Congress, as witnessed by the fact the Republican leadership in both chambers were quoted on the record criticizing the President's decision.  In fact, a majority of Congressional Republicans oppose the tariffs and the broad use of the Section 232 investigations and are considering legislation to negate their effects.  The challenge is whether or not there is enough bipartisan support to overcome what would surely be a Presidential veto of legislation that nullified the tariff decision.

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.

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