On 9 March, President Trump announced new tariffs for imports of Steel (25%) and Aluminium (10%), using the argument that America’s diminished local steel industry poses a security risk to the United States. This is in response to an investigation by the Department of Commerce to into the impact of imports of Steel and Aluminium. It is interesting to note that the final tariffs are higher than the 24% recommended for steel and 7.7% recommended for Aluminium.
Are these dumping duties?
No. While the Commerce Department has a long list of anti-dumping investigations, the rules being used to create these tariffs can be found in the General Agreement on Tariffs and Trade (GATT), the basis for the WTO and all free trade agreements.
The relevant clause is:
Nothing in this Agreement shall be construed . . .
(b) to prevent any contracting party from taking any action which it considers necessary for the protection of its essential security interests . . .
(iii) taken in time of war or other emergency in international relations . . .
This is why it is such a controversial act. In a usual Dumping investigation individual supply chains are analysed to determine if products are being “dumped” into the market and disrupting local production and then additional duties are applied to imports from the offending country. Outside dumping, members of the WTO should not discriminate against other members of the WTO.
What countries will be impacted by this?
Despite China being mentioned extensively during the announcement, it is actually long-term allies of the USA who will be most affected. As the chart below from the Wall Street Journal shows, while China is the largest producer of steel in the world, it only contributes just over 2% of US imports. This is one of the puzzling aspects of this announcement; should the USA be at war, then their significant suppliers would likely be right next to them.
As widely reported, Australia, as a long standing ally and with a trade deficit with the USA, has been spared from the additional tariffs.
The EU has been vocal about the prospect of retaliation in the form of tariffs on items such as bourbon and Levi jeans, however there are strict rules about the scope of what countries can do.
What products are included?
While they are being called the ‘steel tariffs’, not all steel products are being included.
Products that attract the 25% are identified by the following tariff codes:
Harmonized Tariff Schedule (HTS) 6‑digit level as: 7206.10 through 7216.50, 7216.99 through 7301.10, 7302.10, 7302.40 through 7302.90, and 7304.10 through 7306.90, including any subsequent revisions to these HTS classifications.
For the 10% tariff on aluminium, “aluminium articles” are defined in the Harmonized Tariff Schedule (HTS) as: (a) unwrought aluminum (HTS 7601); (b) aluminum bars, rods, and profiles (HTS 7604); (c) aluminum wire (HTS 7605); (d) aluminum plate, sheet, strip, and foil (flat rolled products) (HTS 7606 and 7607); (e) aluminum tubes and pipes and tube and pipe fitting (HTS 7608 and 7609); and (f) aluminum castings and forgings (HTS 76184.108.40.206 and 76220.127.116.11), including any subsequent revisions to these HTS classifications.
Can companies apply for exemptions themselves?
Products not deemed to be produced in the USA in a sufficient quantity or quality can be excluded from these tariffs, after an application by the US importer and approval from the Department of Commerce.
Has this happened before?
President Trump is not the first US President to apply additional tariffs to protect a local industry. These examples are usually raised as they were the most devastating.
At the start of the Great Depression, the Smoot-Hawley Tariff Act raised U.S. tariffs on more than 20,000 imported goods, which some economists blame for adding years to the Great Depression. More recently, President George W. Bush’s 30 percent steel tariff led to increased consumer costs and higher unemployment. And President Barack Obama’s 2009 decision to raise tariffs on Chinese tyres ultimately burdened consumers with $1.1 billion in higher prices. The cost per job saved was nearly $1 million, not considering all the lost jobs that went unmeasured.
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