Trump Administration Imposes Steep Tariffs on Steel and Aluminum Imports

On March 8, 2018, President Trump signed proclamations authorizing the imposition of a 25 percent customs duty on certain steel products and a 10 percent customs duty on certain aluminum products. The duties were imposed pursuant to Section 232 (“Section 232”) of the Trade Expansion Act of 1962, a rarely-used national security provision that authorizes the Department of Commerce (DOC) to investigate the effect of imports on national security.  The new customs duties are scheduled to enter into effect on March 23, 2018.  Below we discuss the Presidential Proclamations and reactions from Capitol Hill and other countries.

In the Proclamations, President Trump cited the following factors in making his determinations to increase duties on steel and aluminum imports:

• Information presented in DOC’s reports, which focused on the impact of foreign competition on the economic welfare of the domestic industry, weakening of the internal economy from displacement of domestic products by excessive imports, and the presence of excess capacity;

• Updated import and production numbers for 2017;

• The failure of other countries to agree on measures to reduce global excess capacity; and

• The continued high level of imports since the beginning of the year.

The proclamations explain that the relief is intended to help the domestic steel and aluminum industries to revive idled facilities, open closed mills and smelters (in the case of aluminum), preserve necessary skills by hiring new workers, and maintain or increase production, to ensure that the domestic industries can supply needed material for national defense and critical industries.

Scope of Investigations

The new duties apply to products that fall within the scope of the DOC’s investigations (noted below). Importantly, the duties apply in addition to any duties currently being applied to the products under the U.S. tariff schedules or existing antidumping and countervailing duty orders.

The affected steel products are described as follows, and the associated tariff classification codes are identified in the Proclamation.

1. Carbon and Alloy Flat Product (Flat Products)
2. Carbon and Alloy Long Products (Long Products)
3. Carbon and Alloy Pipe and Tube Products (Pipe and Tube Products)
4. Carbon and Alloy Semi-finished Products (Semi-finished Products)
5. The initial, intermediate solid forms of molten steel, to be re-heated and further Stainless Products

The affected aluminum products are described as follows, and the associated tariff classification are identified in the Proclamation.

1. Unwrought aluminum;
2. Aluminum bars, rods, and profiles;
3. Aluminum wire;
4. Aluminum plate, sheet, strip, and foil (flat rolled products);
5. Aluminum tubes and pipes and tube and pipe fitting;
6. Aluminum castings and forgings

Notably, the tariffs will be applied to products imported in the forms noted above, and not to imports that incorporate the covered articles.

Country Exclusions

Canada and Mexico

President Trump excluded products of Canada and Mexico from the increased duties. The proclamations state that the exclusion is based on: shared commitments to support national security concerns and address global excess capacity, physical proximity of industrial bases, robust economic integration between the countries, U.S. export volumes to Canada and Mexico, and the close relation of the economic welfare of the U.S. to national security. The Proclamations noted that the President expects Canada and Mexico to take action to prevent transshipment of third country steel or aluminum articles to the U.S.

Other Countries

The proclamations state that any other country with which the United States has a security relationship may “discuss alternative ways to address the threatened impairment of the national security caused by imports from that country.” The proclamations indicate that these discussions could lead to removal or modification of the duties from the country involved.

Product Exclusions

DOC is authorized to exclude from the duties aluminum or steel articles that are determined to lack sufficient U.S. production capacity of comparable products, or for which there are “specific national security-based considerations.” DOC is required to issue procedures for requests for exclusions within 10 days after the date of the proclamations, which is March 19, 2018.

Reactions from Capitol Hill

House Speaker Paul Ryan, Senator Jeff Flake, and Senator Ben Sasse are among those that have voiced their disagreement with the President’s action. Senate Finance Committee Chairman Orrin Hatch referred to the remedies as “misguided” and “a tax hike on American manufacturers, workers, and consumers.” Speaker Paul Ryan and House Ways and Means Chairman Kevin Brady have called for narrowing of the tariffs. Senator Jeff Flake stated that he will introduce legislation to “nullify” the tariffs. On the other hand, Democratic Senators Sherrod Brown and Bob Casey, along with Congressional Steel Caucus co-chair Representative Mike Bost, have praised the President’s actions. In addition, three senators from the steel-producing states Ohio and Pennsylvania have urged the President to broaden the scope of the tariffs to include additional electrical steel products (laminations, cores, and core assemblies).

Potential Retaliation

The European Union (“EU”) and China have stated they are considering retaliatory action in response to the duties. China is reportedly considering import limits on U.S. sorghum (a cereal used to feed livestock) and soybeans. EU Trade Commissioner Cecilia Malmstrom stated that the EU views the measure as “an economic safeguard in disguise, not a national security measure” and can therefore retaliate immediately under the rules of the World Trade Organization. A preliminary EU retaliation list includes steel, apparel, certain industrial goods, and agricultural products. Some of the high value items include bourbon, cranberries and motorcycles. Following the Presidential Proclamations, Commissioner Malmstrom tweeted that she will “seek more clarity” on the Section 232 exclusions in the coming days when she is expected to meet with U.S. Trade Representative Robert Lighthizer and the Japanese Minister of Economy, Trade, and Industry to discuss strategy in another trade investigation involving intellectual property rights and technology transfer requirements in China.