• Krischan Jung

Trump Administration's Steel and Aluminum Tariffs

Updated: Oct 8, 2020

(Written in conjunction with Alicea Hernandez)

In the United States presidential elections of 2016, candidate Donald Trump criticized the North Atlantic Free Trade Agreement (NAFTA) as well as the Trans-Pacific Partnership (TPP), trade agreements he believed hurt the US economy as well as US jobs. After becoming president, Trump withdrew from the TPP. Wishing to prevent companies from outsourcing to foreign countries and to re-establish fair trade for American workers, President Trump has recently implemented tariffs (a tax on particular imports or exports, in this case on imports) on steel and aluminum. The Group of 7 (G7), an informal group of powerful industrialized nations including Canada, France, Germany, Italy, Japan, and the United Kingdom have condemned the United States for these tariffs.

On March 1, President Trump announced the intentions of imposing a 25% tariff on all steel imports and a 10% tariff on all aluminum imports. An order to impose these tariffs after 15 days was signed on March 8, with Canada and Mexico being temporarily exempt. On March 22, it was announced that Canada, Mexico, the European Union, Australia, South Korea, Brazil, and Argentina would be temporarily exempt from the steel/aluminum tariffs, which went into effect on March 23, 2018. On March 28, South Korea (which supplies 10% of the US demand for steel) was declared permanently exempt from the steel tariff, followed by Australia, Brazil, and Argentina on May 2nd. On May 31, the steel/aluminum tariffs were imposed on Canada, Mexico, and the European Union. The tariff order by President Trump cites Section 232 of the Trade Expansion Act of 1962, which allows the president to impose tariffs on products imported in large quantities that pose as a threat to national security.

China, the largest US trading partner, trades a total of ~663 billion US dollars annually, accounting for 2% of the US demand for steel. Before the steel/aluminum tariffs, the US implemented a tariff on solar panels produced outside the US, starting at 30% decreasing to 15% in four years, with the first 2.5 gigawatts each year exempted from said tariffs, which the Trump administration stated was largely directed towards China. On March 22, President Trump signed a memorandum under Section 301 of the 1974 Trade Act, instructing the US Trade Representative to apply a 50 billion US dollar tariff on Chinese goods on the grounds of theft of US intellectual property. In response, the Ministry of Commerce of the People’s Republic of China announced its plans of retaliatory tariffs on 128 US products, with a 15% tariff on 120 of those products and a 20% tariff on 8 products.

On April 3, the US Trade Representative Office listed over 1300 Chinese goods it planned to impose levies on, which China’s Custom Tariff Commission of State Council responded to on April 4 by announcing an additional 25% tariff on 106 US goods, including soybeans, the top US agricultural export to China. On May 9, China cancelled soybean orders from the United States. China has submitted a World Trade Organization (WTO) complaint against the steel/aluminum tariffs on April 9.

The European Union as a whole trades a total of ~1.2 trillion dollars annually, and accounts for around 6% of the US demand for steel. The steel/aluminum tariffs threaten around 7.4 billion US dollars in European exports. As retaliatory measures, the EU plans to impose a 25% tariff on ~200 American products as early as June 20, 2018. According to EU officials, these tariffs would be worth roughly 3.3 billion US dollars. A second batch of tariffs could possibly be implemented, with ~160 US products being targeted with tariffs ranging from 10% to 50% if the WTO declares that the US steel/aluminum tariffs are illegal.

Canada is the second biggest trading partner of the US, trading ~662 billion US dollars annually. It is the largest market for US exports, and accounts for 16% of the US demand for steel, making it the largest steel exporter to America. Prime Minister Justin Trudeau showed discontent and frustration towards the Trump administration as well as President Trump himself on the steel/aluminum tariffs and the handling of NAFTA renegotiations. Canada plans to impose retaliatory tariffs of up to 16.6 billion US dollars worth of U.S. imports, going into effect on July 1.

Mexico, as the third biggest trading partner for the US, trades ~586 billion dollars annually , accounting for 9% of the US demand for steel. Mexico has implemented retaliatory tariffs on many US staple products, which the Mexican Economy Ministry estimates to be valued at around 3 billion US dollars. Mexico also plans to implement a 20% tariff on pork leg and shoulder imports from the US.