Temporary Exemptions on Steel, Aluminum Tariffs End; Retaliations in Motion From EU, Mexico, Canada

The presidential proclamation on iron and steel products says imports from Argentina and Brazil will be subject to quotas, in addition to already subject imports from South Korea. The proclamation on aluminum says quotas will apply to imports from Argentina. Australia is not mentioned in either of the quota provisions. As of 12:01 a.m. on June 1, steel from all countries except Australia, Argentina and Brazil will be subject to a 25 percent tariff, and aluminum from all countries except Australia and Argentina will face a 10 percent duty. Brazil had reached agreement on an exemption on steel but not on aluminum. The quotas will account for imports since Jan. 1, 2018. CBP issued a CSMS message on the filing requirements.

Canadian Prime Minister Justin Trudeau called the new tariffs an "affront" in a May 31 speech. Americans remain "allies" and Trudeau said he hopes "at some point common sense will prevail." Canadian Foreign Affairs Minister Chrystia Freeland said at the press conference the country will impose "dollar for dollar" tariffs on goods originating from the U.S. starting July 1. American steel and aluminum products are among the goods to face new tariffs, Freeland said. Canada will undergo a 15-day consultation to allow for input on the list of goods proposed to be subject to tariffs, she said. Freeland noted this will be the largest trade action the country has taken in the "post-war era."

The EU said it plans to go forward with new tariffs on U.S. goods as a result of the Section 232 tariffs. "This is not the way we do business, and certainly not between longstanding partners, friends and allies," European Union Commissioner for Trade Cecilia Malmstrom said in a news release. "Now that we have clarity, the EU's response will be proportionate and in accordance with WTO rules. We will now trigger a dispute settlement case at the WTO, since these US measures clearly go against agreed international rules. We will also impose rebalancing measures and take any necessary steps to protect the EU market from trade diversion caused by these US restrictions." The EU notified the WTO of possible new tariffs on May 18 (see 1805180064) and, "in line with the Organisation rules, could trigger them 30 days later," it said.

Mexico said it will respond with tariffs on U.S. goods, too. "Faced with tariffs imposed by the U.S., Mexico will impose equivalent measures to various products such as hot- and cold-rolled steel, including coated and various tubes, lamps, pork legs and shoulders, sausages and other food preparations, apples, grapes, blueberries and various cheeses, among other products, up to the level Mexico is affected by the tariffs," according to an informal translation of a Mexican Ministry of Economy news release. "This measure will be in force until the U.S. government eliminates the imposed taxes."

House Ways and Means Chairman Kevin Brady, R-Texas, also objected to the administration's decision. “These tariffs are hitting the wrong target. When it comes to unfairly traded steel and aluminum, Mexico, Canada, and Europe are not the problem -- China is," Brady said. The exemptions and negotiations should continue "with these important national security partners to find a solution and address the damage caused to American exporters. And the Administration will need to come to Capitol Hill to provide answers about the indiscriminate harm these tariffs are causing our local businesses." The product exclusion process is also flawed and the Administration must "step up" to improve that process, said Brady.

Senate Finance Chairman Orrin Hatch, R-Utah, said he "will continue to push the administration to change course.” House Ways and Means ranking member Richard Neal, D-Mass., called the tariffs a "smoke screen for the Trump Administration’s surrender to China." At the same time "the President justifies the tariffs on European, Canadian, and Mexican steel and aluminum as national security measures, the Trump Administration is in the process of cutting a deal with China premised on selling out U.S. national security concerns while addressing exactly zero aspects of China’s unfair trade in steel and aluminum," Neal said.

The American Iron and Steel Institute said it is pleased and that it agrees that exempted countries should be subject to quotas and that it will be interested to learn more on "how the exemption for Australia will further the objectives of Section 232." The Aluminum Association said it still disagrees with the administration's tactics and "believes that no country that operates as a market economy should be subject to unnecessary and disruptive tariffs or quotas."

World Trade Organization Director-General Roberto Azevedo spoke of the importance of the World Trade Organization as trade fights brew. "The rising trade tensions and the risk of escalation are of very real concern," he said without a mention of any specific tariffs. "It is positive that Members are talking to each other and taking up their concerns at the WTO. The system was built to resolve these problems in a way that prevents further escalation. We have done so very successfully on many previous occasions – and we stand ready to play this role once again."