Importers, Exporters Waiting for Shoe to Drop on Section 232 Derivatives List and Retaliation

The U.S. added six aluminum products -- including auto bumper stampings and tractor body stampings -- to the list back in 2020, and four steel products, including nails, tacks, auto bumper stampings and tractor body stampings.

The steel proclamation suggested that fabricated structural steel and prestressed concrete strand would be added to the list subject to the tariff, though that list has yet to be released. The tariffs on the additional steel derivative products won't take effect until notification from the Commerce Department that “adequate systems are in place to fully, efficiently, and expediently process and collect tariff revenue for covered articles.”

At the time of the previous additions, during the first Trump administration, it said the items were chosen when the metal represented on average at least 2/3 of the cost of the materials in the article, and if the import volumes of the article increased since the actions began, more than the average increase in imports. Imports of the items targeted in 2020 increased somewhere between 23% and 152%.

The earlier process also allowed additional derivative items to be chosen, just as this time, with requests from trade groups or domestic producers; Commerce has 60 days to decide such requests.

During the Biden administration, the White House decided that aluminum items from Mexico, whether in the scope of the original action or derivatives, would be subject to tariffs if they were smelted or cast in Russia, China, Iran or Belarus.

Although the U.S. imports more than 80% of its aluminum, President Donald Trump is not allowing Canada, the major supplier, to be exempted from the newly increased 25% tariff on aluminum that begins March 12, and no product exclusions will be allowed.

While the Aluminum Association did not explicitly ask Trump to exclude Canada from 25% tariffs, its statement Feb. 11 said: "In order for these [aluminum industry] investments to be successful and for American firms to make the cars, trucks, beverage cans, fighter jets, body armor and more that our industry provides, we need ready and affordable access to metal. Today, there is not enough smelting capacity in the United States to supply the growing aluminum industry with the input materials it needs."

Prime Minister Justin Trudeau told reporters that the tariffs were unjustified, and that Canada would be communicating with U.S. officials about the negative impacts they would have.

Including Canada and Mexico is a major change from 2018, when Trump's proclamation said: "I conclude that Canada and Mexico present a special case. Given our shared commitment to supporting each other in addressing national security concerns, our shared commitment to addressing global excess capacity for producing aluminum, the physical proximity of our respective industrial bases, the robust economic integration between our countries, the export of aluminum produced in the United States to Canada and Mexico...." no tariff would apply. He did later apply it to the two countries, then reversed himself about a year later.

This proclamation complained that Canada, Mexico and countries with quotas have taken a larger share of imports since the tariffs were imposed.

The proclamations instruct CBP to prioritize reviewing classification of goods covered by the action, "and, in the event that it discovers misclassification resulting in loss of revenue of the ad valorem duties proclaimed herein, it shall assess monetary penalties in the maximum amount permitted by law."

Current specific product exclusions for both steel and aluminum will continue until the volume is met, or the date of expiration, whichever comes first; general exclusions end on March 12, the day the tariffs go into effect.

This is a longer runway than in 2018, when the proclamation was published March 8 of that year, and it went into effect March 23.

The Coalition of American Metal Manufacturers and Users, which represents thousands of companies that buy these metals, said that the Section 232 tariffs have increased steel and aluminum prices in the U.S., whether from domestic production or imports. The action harms manufacturers who need these metals, they said.

"As a result, U.S. manufacturers are paying significantly more for steel and aluminum than their global competitors, undermining their ability to compete. Small and medium-sized businesses are particularly vulnerable, losing contracts to overseas rivals with unrestricted access to these essential inputs," CAMMU wrote.

The group also said other manufacturers could be hurt by retaliatory tariffs from trading partners. In 2018, the EU imposed 25% tariffs on Harley-Davidson motorcycles, for instance.

Maros Sefcovic, the EU's commissioner for trade and economic security, struck a diplomatic tone in front of the European Parliament on Feb. 11, while making clear that the EU views the tariffs as a betrayal of trust.

He attempted to appeal to U.S. consumers, saying that "by imposing tariffs, the U.S. will be taxing its own citizens, raising costs for its own business, and fueling inflation. In addition, tariffs are not only harmful for the trading partners directly involved, but also risk having disruptive effects for many others, as well as the global trading system as a whole. Put simply: it is a lose-lose scenario."

Still, he said, the EU will respond "in a firm and proportionate way by counter measures."

He left room for the Trump administration to walk back the measures, saying that "this is the way to protect the European interest, but it is not our preferred scenario. We remain committed to constructive dialogue. We stand ready for negotiations, and to find mutually beneficial solutions where possible. There is a lot at stake for both sides. We want to make it work, not least because it simply makes sense."

House Ways and Means Committee ranking member Richard Neal, D-Mass., and Trade Subcommittee ranking member Linda Sanchez, D-Calif., criticized Trump for relying on a 7-year-old investigation for the changes, though they also suggested there would be exemptions offered after private lobbying. Trump has said there will be no exemptions.

While these actions are built on the original investigation, which sought to bring steel capacity utilization up to 80% and aluminum producing capacity up to 80%, that report predicted that a universal 7.7% tariff on aluminum would be enough to achieve that goal, along with a 24% steel tariff. The steel industry briefly did reach 80% capacity, and aluminum never did.

“Tariffs alone will do little to stop the unfair trade practices in these industries or bring back American jobs. Our workers and producers in steel and aluminum deserve relief that will deliver results, and we could do that by working with our allies who are also being hurt by the flood of steel and aluminum in our markets from bad actors," the two said.

Rep. Rosa DeLauro, D-Conn., the top Democrat on the powerful House Appropriations Committee, said: "American jobs are threatened by cheap steel flooding the market from China, Mexico, and more, not Canada. Across-the-board tariffs on trusted trading partners like Canada, who have worked with us to align our trade policy against trade cheating in steel and other industries, will hurt workers in both countries. We should be working with our trading partners to apply maximum pressure to regimes that cheat the rules. Using tariffs in a one-size-fits-all manner reduces their effectiveness against truly bad actors."

Sen. Chuck Grassley, R-Iowa, once a champion of free trade, told reporters on a weekly press call that the price of tractors didn't go up due to tariffs in the past, so "for right now, I wouldn't worry about it."