Steel and Aluminum Tariffs Revisited
My previous column (April 2018) covered the March 1 imposition of tariffs on imported steel and aluminum. The Trump administration’s seemingly sudden declaration of a tariff policy became real when, on March 8, the President signed an order imposing a 25% tariff on imported steel and a 10% tariff on imported aluminum.
The imposed tariffs are a deviation from the open trade/low tariff policies the U.S. has implemented in recent decades. It wasn’t long before there was considerable push-back from certain other countries to be exempted from these tariffs. At the head of the list were our NAFTA trading partners Canada and Mexico, to whom Trump permitted a temporary exception while NAFTA gets re-negotiated.
As the May 1 deadline for tariff imposition came along, the President extended the date for another 30 days to allow further time to negotiate deals with Canada, Mexico and the European Union. Similarly, the White House has implemented tariff imposition delays with Argentina, Australia and Brazil.
The Presidential Proclamation of April 30 also states: “The United States and South Korea have agreed on a range of measures, including measures to reduce excess steel production and excess steel capacity, and measures that will contribute to increased capacity utilization in the United States, including a quota that restricts the quantity of steel articles imported into the United States from South Korea.”
Of particular relevance to the forging industry in the context of trade and tariffs is Section 232 of the Trade Expansion Act of 1962 (TEA 1962). Shortly after World War II ended, the U.S. signed the General Agreement on Tariffs and Trade (GATT), an economic agreement between many nations in 1947. But there was a catch. To attract signatories to GATT, a special clause was added to the agreement stating that if certain imports threatened a nation’s security the importing nation could impose high tariffs on those goods. This clause eventually became Section 232 of TEA 1962.
Section 232 permits a president to investigate and determine if the import of certain goods threatens the security of the U.S. A president could then conclude whether certain imports seriously impaired national security interests enough to decide whether tariffs were in order. With the help of Commerce Secretary Wilbur Ross, the Trump administration has decided to invoke Section 232 and impose tariffs on steel and aluminum.
The main target here, of course, is China and its overcapacity for steel production. This is steel produced with little or no regard to its effect on the environment. For years, China’s state-supported overcapacity has been maintained to export, and often “dump,” cheap steel into other markets. In the process, China is also effectively exporting its own unemployment to other steel-producing countries, including the U.S.
The US is the world’s largest importer of steel, with Canada, Brazil, South Korea and Mexico being its primary sources of imports. As the U.S. seeks to renegotiate tariffs with these and other countries, the domestic forging industry should brace itself for an increase in its basic raw-material costs and more competition from imports of finished forgings into the U.S.
Not surprisingly, the forging community opposes this looming possibility, as does FORGE. This publication leans heavily toward free markets as they apply to the global production and consumption of steel and aluminum. A schoolyard-bully approach to foreign trade will not serve the U.S. economy well in the long run. We understand the temptation to yield to protectionism as free-market forces are seriously undermined in certain countries, but we urge well-thought diplomatic and voluntary trade limits as the foundation of our global trade.