Steel, Aluminium Tariff Talks Enter New Phase as US Grants Extra Time to EU, NAFTA Partners

3 May 2018

US President Donald Trump issued two presidential proclamations earlier this week postponing planned tariffs on imported steel and aluminium from Canada, Mexico, and the European Union, while noting that the US has reached draft deals with Argentina, Australia, and Brazil that would exempt them permanently.

The EU, Canada, and Mexico now have until 1 June to negotiate permanent exemptions with Washington, though Trump indicated that he could issue additional proclamations extending this deadline further if necessary.

Meanwhile, the presidential proclamations issued on Monday did not specify the terms of the “agreements in principle” that the US has now reached with Argentina, Australia, and Brazil. It also left open the possibility of the steel and aluminium tariffs being imposed unless those agreements are completed in the near term.

Australian Prime Minister Malcolm Turnbull welcomed the agreement in principle reached between Washington and Canberra, issuing a statement suggesting that “the exemption reflects the fair and reciprocal trade relationship Australia shares with the United States and underpins the unbreakable friendship between our two great nations.”

Turnbull added that his country would continue working with the US to address trade issues of common concern, naming specifically the dumping and transhipment of these metals by other trading partners. 

Intense negotiating period

The news comes just over one month after Trump imposed global tariff hikes of 25 percent and 10 percent, respectively, on imports of steel and aluminium coming into the US, citing alleged national security concerns. The duties were recommended by the US Department of Commerce following an investigation under Section 232 of the 1962 Trade Expansion Act.

Those tariffs, imposed on 23 March, came with temporary exemptions for some countries. Specifically, Trump had clarified that he would be excluding Australia, Argentina, Brazil, Canada, the European Union, Mexico, and South Korea, pending further discussions. (See Bridges Weekly, 29 March 2018)

The increased duties still apply to all other US trading partners, including major steel exporters such as Japan, Turkey, and South Africa. China, the world’s largest steel producer, is also affected, though its exports to the US are relatively low given other import policies in place. Beijing has put in place its own tariffs on a series of US products in response to the Section 232 measures, targeting goods such as fruit and pork.

The countries that were initially excluded have since been seeking “satisfactory alternative means to address the threatened impairment to the national security by imports” of those products, in a bid to avoid facing the duties. While South Korea and the US had clinched a deal in March, in tandem with talks to revise their existing trade pacts, the other countries had continued their negotiations with Washington. (See Bridges Weekly, 29 March 2018)

Meanwhile, the US Section 232 tariff hikes have also sparked scrutiny at the WTO, including a request by China last month for dispute settlement consultations (DS544). Various other members have requested safeguard consultations with the US, raising the possibility of compensation, though Washington has countered that the metal tariffs are not safeguard measures.

EU, NAFTA partners look to next steps

The tariff saga is due to continue at least one more month, given the extensions accorded to Canada, Mexico, and the 28-nation European Union, following a frenzy of meetings among top negotiators from the countries involved.

“The United States is continuing discussions with Canada, Mexico, and the EU. I have determined that the necessary and appropriate means to address the threat to the national security posed by imports of steel articles from these countries is to continue these discussions and to extend the temporary exemption of these countries,” said Trump in Monday’s proclamation.

A separate statement from the White House clarified that the objective is to clinch deals on “quotas that will restrain imports, prevent transhipment, and protect the national security.”

Prior to the announcement, the tariffs had been a hot-button item on the agendas of two leaders’ meetings last week in Washington, with French President Emanuel Macron and German Chancellor Angela Merkel visiting the US capital separately for discussions with Trump on various foreign policy items, including a possible reprieve from the metal tariffs. (See Bridges Weekly, 26 April 2018)

EU officials have since issued a statement in response to the US extension of the tariff exemption, suggesting on Tuesday 1 May that the move “prolongs market uncertainty, which is already affecting business decisions.”

“Overcapacity in the steel and aluminium sectors does not originate in the EU. On the contrary, the EU has over the past months engaged at all possible levels with the US and other partners to find a solution to this issue,” said a statement from the European Commission.

The EU statement also said that, while Brussels is open to continuing discussions with Washington, it would “not negotiate under threat” – adding that any “work programme” between the two sides would need to be “balanced and mutually beneficial.”

Brussels has already launched a safeguard investigation in response to the US steel and aluminium tariffs, citing concern that imposing steel duties on other countries could lead to inexpensive steel ultimately arriving on the European market from abroad – with potentially devastating effects for European industry. (See Bridges Weekly, 29 March 2018)

Meanwhile, EU industry leaders have similarly called for both sides to reach a deal promptly, with steel association EUROFER issuing a statement on Tuesday calling for a permanent exclusion.

“Despite all the evidence of the harm to the EU-US relationship – and to our respective economies – the Administration has opted to continue a policy of uncertainty in its international trade practice,” said Axel Eggert, EUROFER’s President. “However, in our view, the EU must not bend to unilateral trade measures and should continue to back multilateral solutions under the WTO framework.”

Meanwhile, the US is currently negotiating an update to the North American Free Trade Agreement (NAFTA) with Canada and Mexico, with ministers due to reconvene on 7 May. Whether a permanent exemption from the tariffs could be tied to a completed NAFTA deal remains unclear, amid conflicting statements from negotiators on the subject.

ICTSD reporting.

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