9 December 2019

President Trump To Restore Tariffs On Aluminum And Steel Imports From Brazil And Argentina

Seyfarth Shaw LLP


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While China commands the media spotlight in the global war on trade, new trade battles are being waged south of the equator. On Monday December 2, 2019
Argentina International Law
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While China commands the media spotlight in the global war on trade, new trade battles are being waged south of the equator. On Monday December 2, 2019, President Trump announced that he would reinstate tariffs on aluminum and steel imports from Argentina and Brazil amid accusations that those countries have been engaging in a “massive devaluation of their currencies.” The President’s announcement, which came via Twitter, also urged the Federal Reserve to take measures to counter foreign currency devaluation, which negatively impacts US manufacturers and farmers ability to fairly export their goods.

Details of the new mandate are unclear as the White House has yet to release an order explaining the changes. Although the US started imposing global tariffs of 25% on steel and 10% on aluminum in 2018 on countries such as China, certain countries, including Brazil and Argentina, were quick to negotiate exemptions from the tariffs in the form of duty-free quotas. The President’s mandate comes on the heels of softening economies and weaker currencies in Brazil and Argentina, which has the effect of making farm goods in those countries cheaper than US farm production.

Accusations of currency devaluation are nothing new to international trade disputes, as the US has long accused China of devaluing its currency in order to bolster its own economy. Currency devaluation involves taking measures to strategically lower the purchasing power of a nation’s own currency. A weak domestic currency makes a nation’s exports more competitive in global markets, and simultaneously makes imports more expensive. With higher export volumes spurring economic growth, many countries are tempted to lessen the purchasing power of its domestic currency.

Whether this practice is actually taking place in Brazil and Argentina is open for debate. Neither Brazil nor Argentina has been identified as currency manipulators in the recent US Treasury Department currency report, which reviews developments in international economic and exchange rate policies. In addition, economists point to the fact that Brazil and Argentina have recently been selling dollars from their reserves to strengthen their currencies—currency manipulators traditionally do the opposite.

Regardless of whether Brazil and Argentina are actually manipulating their currencies, the President’s agenda of protecting US markets is clear. However, the practical effect remains to be seen. While tariff impositions make for strong protectionist headlines, and seemingly generate additional revenue, US manufacturing and agriculture have slid amid the ongoing trade dispute with China.

Seyfarth will be monitoring the regulatory developments pertaining to the reinstatement of tariffs on aluminum and steel imports from Brazil and Argentina over the next two weeks and beyond. The directive as described by President Trump could have a considerable impact on the cost of doing business for certain industries. Industrial construction and infrastructure contractors currently importing structural steel from Brazil and Argentina will no longer be afforded the benefit of those tariff exemptions. Additionally, contractors looking to obtain materials from cheaper sources will certainly reshape future procurement strategies in light of the restored tariffs. Whether the President reinstates tariffs against any other previously exempt countries on the basis of currency manipulation will be monitored going forward.

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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