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Tracking Tariffs and Trade

Prime Policy Group’s trade team will be providing frequent updates on the latest news in trade policy. If you wish to receive more emails like this one, please email casie.daugherty@prime-policy.com to be added to our list.

March 16, 2018

Late this afternoon the Department of Commerce released its interim final rule for companies seeking product exemptions from the recently announced steel and aluminum tariffs.

The Interim Rule can be found here.

Exclusions may be granted, according to the rule, “if the Secretary determines the steel or aluminum article for which the exclusion is requested is not produced in the United States in a sufficient and reasonably available amount or of a satisfactory quality or should be excluded based upon specific national security considerations.”

As we’ve mentioned in previous additions of this report, exemptions are only available for individuals or organizations undertaking business activities (construction, manufacturing, supplying steel to users, etc.) in the U.S. Exemptions will only extend to the individual or organization that files the specific request, unless otherwise stated by the Department of Commerce.

As exemptions to the steel and aluminum tariffs are being promulgated under a formal regulatory procedure, companies and individuals should be aware that all exclusion requests, as well objections to those requests, will be made public.

The exclusion forms can be found here, though please be aware that they will not be available until March 19 when the interim formal rule is officially published in the federal register.

Exclusion Requests must include:

  • Request for Exclusion from Remedies Resulting from the Section 232 National Security Investigation of Imports of Steel form or Request for Exclusion from Remedies Resulting from the Section 232 National Security Investigation of Imports of Aluminum
  • Business activities within the U.S. that the requestor is engaged
  • The basis on which the exclusion is sought

Objections to Exclusion Requests must:

  • Include the Response Form for Objections to Posted Section 232 Exclusion Requests – Steel or Response Form for Objections to Posted Section 232 Exclusion Requests – Aluminum.
  • Identify and provide support for why the exclusion should not be granted
  • Be filed no more than 30 days after the exclusion is posted

Notably, the rule states that product exemptions may take up to 90 days, meaning companies would be subject to the tariffs in the intervening period.

We will continue to monitor and provide updates.

March 12, 2018

Companies and countries across the globe are still coming to terms with the significant tariffs that the White House announced on steel and aluminum imports last week. The proclamations signed by the President were short on detail and, in the intervening days, additional details have been scarce. However, more clarification should be coming on or before March 18, the date by when the Secretary of Commerce is required to lay out the process for affected parties to seek exclusions from the tariffs.

It is important to note that requests for exclusion from these tariffs (utilizing this process) will be available only to affected parties within the U.S.; thus, individual countries would not be able to seek relief in this way. However, there may be additional details that pertain specifically to countries (like the ones laid out for the EU below). If the Administration waits until March 18 to issue the procedures, affected parties would be left with only five days to work through the process before the tariffs go into effect on March 23, as announced.

The tariff proclamations have led to public lobbying and threats of retaliation from some of the United States most important trading partners. Australia seems to be the first non-North American country to break through, as Prime Minister Turnbull tweeted that the country had received a “commitment from the President.” It is unclear, however, what form that commitment had taken or any concessions required to achieve it.

EU trade leaders have been less successful in their efforts. Attempts to hammer out a deal over the weekend failed. Malmström and USTR Lighthizer, the U.S. laid out five principles that could result in exclusion from the steel and aluminum tariffs. The principles include whether the country is a security partner for the U.S.; whether it participates in the steel excess capacity global forum; if the country imposes trade defense measures to prevent dumped steel from entering its market; if it supports U.S. disputes in the WTO; and the steel and aluminum trade volume between the U.S. and that country. However, more details about the specifics of the procedure were unclear.

Additionally, as the contentious meeting between the U.S. and the EU was taking place, President Trump once again threatened to put tariffs on European cars. He followed up that sentiment, as well as several promises to “tax Mercedes-Benz… tax BMW” at a campaign rally in Pennsylvania on Saturday, with a tweet today saying that Secretary Ross would be “speaking with representatives of the European Union about eliminating the large Tariffs and Barriers they use against the U.S.A. Not fair to our farmers and manufacturers.” This, of course, was not well received by EU officials including Trade Commissioner Cecilia Malmström who promised to “stand up to the bullies” who use trade “as a weapon to threaten and intimidate us.”

U.S. and EU officials have said that they will continue to work through the week to reach a resolution.

March 8, 2018

Today, the President signed a proclamation instructing the International Trade Commission to update the tariff schedule to reflect an increased 25% tariff on steel and 10% on aluminum, effective after 15 days.

Canada and Mexico have been given indefinite exclusions, and the Administration said other countries may negotiate with the United States if they would like an exemption, though at this time it is unclear precisely what that means. However, it does mean that there will be opportunities for countries to present their arguments to the Trump Administration, something that even a couple of days ago seemed unlikely.

The proposed tariffs have received vociferous support from domestic steel and aluminum producers and labor unions, but also have been met with sharp opposition from global investors and America’s trading partners worldwide.

To justify these tariffs and bypass Congress’ traditional role in regulating international trade, the Trump Administration has invoked Section 232 of the Trade Expansion Act of 1962. This relatively obscure law authorizes Secretary of Commerce Wilbur Ross to investigate to determine if the import of any foreign good or product is a threat to national security. If deemed a threat, the president can set tariffs on the good or product – in this case, steel and aluminum – without the consultation of Congress.

While the Trump Administration argues that the steel and aluminum tariffs’ implementation meets the national security threat requirement under Section 232, this rationale may fail to meet the separate national security standard established in Article XXI of the General Agreement on Tariffs and Trade (GATT). WTO members are likely to challenge the new tariffs. The WTO can authorize retaliation under the principle of reciprocity.

Typically, specialty-product imports have tariff treatment that has been carefully negotiated, and the Most Favored Nation (MFN) status of most of our import and export trade regime requires that the lowest tariff be offered to all our trading partners if it is offered to one.

The effects of the President’s proclamation will mean retaliation from U.S. trading partners.  Their responses will be sharply focused to have maximum effect politically and economically. The European Union has a laundry list of items, totaling about $3.5 billion in American imports, that it is ready to place tariffs on- everything from peanut butter to bedspreads, t-shirts to orange juice, Harleys to cranberries. China is also rumored to be considering increased tariffs on a host of items.

The President’s action on tariffs has received uncharacteristically strong pushback from Republicans in Congress. Yesterday, 100+ House Republicans sent a letter to the White House expressing “deep concerns” about the proposed tariffs. Senate Majority Leader Mitch McConnell also said that he had a “high level of concern” about how the tariffs would impact the economy, and Senate Finance Committee Chairman Orrin Hatch wrote a letter citing his “very deep concerns” that the tariffs could undo the gains made through tax reform.

Democrats on the Hill also pushed back on both the need for and impact of tariffs on steel and aluminum. Senate Minority Leader Chuck Schumer (D-NY) had strong words for the “sweeping” tariffs and urged the President to focus on China. Additionally, the moderate New Democrat Coalition in the House also sent a letter calling for immediate hearings on the potential impacts of the action.

The effects of this announcement will mean higher prices for basic items in the U.S. economy – from beer cans to lumber to autos. The announcement is likely to have far-reaching impact on inflation and the overall economy.

Some other trade highlights:

“Republicans in Congress are desperately trying to talk President Donald Trump down from his proposed tariffs, lest they have to consider a legislative check on the White House instead—a move that some lawmakers say isn’t feasible. House Speaker Paul Ryan pushed back on Monday against Trump’s plan to impose a 25-percent tariff on steel and a 10-percent tariff on aluminum. Most Republican lawmakers have been quick to oppose the proposed tariffs, which they fear could spark a trade war and cause harm to various American industries and consumers, as well as undermine the economic gains Republicans expect from their tax bill. The tariffs were put forward in the name of national security and supposedly are intended to punish China, but the White House has left it open that they could apply across the board, without exemptions for close trading partners or allies.”

“Less than three months after signing the first major tax reform bill in 31 years, President Trump has announced that the administration will impose a 25 percent tariff, or tax, on imported steel and a 10 percent tariff on imported aluminum. While the new taxes are intended to reduce the demand for imported goods, thus opening the market to domestic producers, the cost of these taxes will be borne initially by firms that buy the imported steel and aluminum, and eventually passed on to consumers through higher prices. While the administration has not released estimates on the magnitude of these new taxes, we estimate that they could cost U.S. firms nearly $9 billion if 2018 imports equal 2017 levels.

President Donald Trump tweeted that “trade wars are good, and easy to win,” adding that “when we are down $100 billion with a certain country and they get cute, don’t trade any more-we win big. It’s easy!” So, if you play that out a bit, looking at one of the countries we currently trade with, would we “win big” if we were to just stop trading with it?