One Week Left To Get Exemptions from the Steel/Aluminum Tariffs

With all the media coverage of President Trump’s steel/aluminum tariffs, it would be easy to assume they are in effect already, but they don’t actually start until next Friday, March 23. This is from the Presidential proclamation relating to steel:

Except as otherwise provided in this proclamation, or in notices published pursuant to clause 3 of this proclamation, all steel articles imports specified in the Annex shall be subject to an additional 25 percent ad valorem rate of duty with respect to goods entered, or withdrawn from warehouse for consumption, on or after 12:01 a.m. eastern daylight time on March 23, 2018.

The “except as otherwise provided” qualifier is important here. There is still time to narrow the scope of the tariffs significantly, both through specific product exclusions and broader country exemptions. Canadian and Mexican steel has already been exempted. And President Trump had a tweet suggesting Australia would be exempt: “Working very quickly on a security agreement so we don’t have to impose steel or aluminum tariffs on our ally, the great nation of Australia!” But what about other U.S. trading partners? The EU, Brazil, South Korea, and Japan, among others, are all going to be making their case to the U.S. Trade Representative, who is running these negotiations.

The criteria for exemptions for these countries is as follows: “Any country with which we have a security relationship is welcome to discuss with the United States alternative ways to address the threatened impairment of the national security caused by imports from that country.” That’s obviously pretty vague. What exactly is the U.S. looking for in these negotiations? Maybe it is looking for increased military spending by our allies. Maybe it is looking for support for the U.S. position on addressing global steel overcapacity and other trade issues. Maybe it is looking to convince these countries to “voluntarily” reduce their steel and aluminum exports to the U.S., which is an arrangement used in the 1980s, when current U.S. Trade Representative Robert Lighthizer last worked for USTR. But today’s trade world is very different from the 1980s, and it’s not clear that any of our trading partners are going to be willing to cave in to U.S. pressure.

Perhaps the best outcome we can expect here is some face-saving deals, in which other countries agree to do things they were already going to do, the U.S. grants the exemptions, and everyone can declare victory. All of this is far from ideal, but having gotten ourselves into this, it may be the best way out. Otherwise, if these tariffs are actually imposed on all of these countries, there will be significant harm to the domestic economy and the very real prospect of retaliation (by the EU in particular, but possibly others as well). 

The next week will be a mad dash of diplomacy to try to salvage something out of this mess.

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