New Steel Tariffs on Brazil and Argentina?

President Trump announced via tweet on Monday that he was imposing tariffs on steel and aluminum imports from Brazil and Argentina due to both governments devaluating their currencies. These two countries previously had reached a deal with the Trump administration to avoid Section 232 steel and aluminum tariffs by agreeing to quotas. Both Argentina and Brazil were exempted from the 232 steel and aluminum tariffs in May 2018. The tariffs can’t be “restored” because the two countries were not subject to tariffs in the first place. The exemptions for both countries required Presidential Proclamations, and to change the quotas to tariffs would require new proclamations as tariffs can’t be re-imposed by a tweet. At this writing, we are still awaiting these proclamations.

If the President does move forward with these tariffs, it would likely lead to an immediate legal challenge. A current U.S. Court of International Trade case (Transpacific Steel v U.S.) is focused on this exact issue of whether the President can modify Section 232 import restrictions. The case involves an earlier decision by President Trump to raise the Section 232 steel tariff on Turkey to 50 percent. In a preliminary opinion that was issued to deny the US government’s motion to dismiss the case, the Court ruled against the President’s actions against Turkey because (1) he did not give a reason for raising the tariff only on Turkish steel imports that was related to the 232 statute; and (2), the President did not follow proper procedures in issuing the Proclamation.

There is growing evidence that the Section 232 steel tariffs are damaging U.S. manufacturers and not helping the domestic steel industry. It’s important to note that, while Brazil is the second largest exporter of steel to the United States, most of these exports are semi-finished products (slabs) used by the domestic steel industry to make other steel products. In other words, domestic steel producers are the ones importing the steel from Brazil. This is one reason why President Trump had agreed to a quota instead of tariffs for Brazil, and why in 2002 President George W. Bush decide to impose a tariff-rate quota on Brazil instead of Section 201 tariffs (Brazil was able to export 5.4 million tons of steel tariff-free during the 201 tariffs).

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