US metal tariffs on Brazil, Argentina may defang Trump’s national security trade power

09 Dec 2019 12:45 pm by Kat Lucero

US President Donald Trump may help weaken his national security rationale for the additional duties he imposed on foreign steel and aluminum nearly two years ago if the administration follows through with a new tariff threat on Brazil and Argentina.

Trump rattled financial markets last Monday after he announced on Twitter that he would “restore” the metal tariffs on Brazil and Argentina because of the countries’ “massive” currency devaluations that haven't been good to US farmers and manufacturers.

The president had exempted the two Latin American countries from the tariffs of 25 percent on steel and Brazil from the 10 percent on aluminum in May 2018, replacing the duties with import quotas. The additional duties were first imposed earlier that year for national security reasons under Section 232 of the Trade Expansion Act, a rarely used authority enacted during the height of the Cold War that the Trump administration has been actively invoking, especially as leverage in trade negotiations.

Because of Trump, Section 232 tariffs are now scrutinized in Congress and federal courts — including in last month's Court of International Trade decision that said the president violated the statutory deadline when he issued an order to raise the steel tariff to 50 percent on only Turkey.

And last Tuesday, a trio of US steel importers filed a new complaint against the administration over the 25 percent steel tariff, alleging the “deficient” national security justification for the levies and violations of deadlines embedded in Section 232.

— Brazil, Argentina tariffs —

US tariffs on Brazil and Argentina would draw similar legal challenge if federal agencies proceed with the president’s announcement under Section 232 — especially when such an order would arguably be well beyond the statutory deadline, as addressed in the 50 percent steel tariff on Turkey.

“Furthermore, even if this action were legitimate, the statutory window for imposing these tariffs has closed,” said US Senator Pat Toomey, a Pennsylvania Republican who has sponsored Section 232 reform legislation that the Senate Finance Committee has been mulling to adopt.

The threat surprised trade observers, including those closely following the US steel industry. Some believed the announcement may have been prompted by Trump’s dissatisfaction over China’s purchase of soybeans from Brazil and Argentina instead of the US. Chinese purchases of the product have been discussed in ongoing talks between Washington and Beijing because American farmers have been the top casualties in a trade spat between the two governments.

The White House hasn’t issued an executive order or a proclamation that would make tariffs on Brazil and Argentina official and didn't respond to MLex inquiries on whether it would do so.

Changing the steel quotas, especially for Brazil, would be “bad news” for the sectors of US industry that depend on Brazilian steel slab, according to Paul Nathanson of the Coalition of American Metal Manufacturers and Users, which represents over 30,000 US companies in the manufacturing sector and downstream supply chains.

Slabs are rectangular semi-finished products used as main materials in producing flat steel goods, such as hot-rolled coils or plates.

A 25 percent tariff on Brazilian steel would raise costs for the manufacturing industry, Nathanson told MLex. Plus, currency manipulation, as alleged in Trump’s two-part Twitter post about Brazil and Argentina, is not mentioned as a security issue in Section 232, and the two governments aren’t considered currency manipulators.

— Litigation —

The American Institute for International Steel, or AIIS, and two of its members continue to challenge all tariffs under Section 232 at the US Court of Appeals for the Federal Circuit, which will hold oral arguments on Jan. 10. AIIS first attempted to bypass the traditional appeals route at Federal Circuit by directly asking the Supreme Court to review the trade court’s decision, which didn’t happen.

AIIS had lost its challenge earlier this year at the CIT when a three-judge panel affirmed Trump’s imposition of the metal tariffs. The judges ruled in March that the lower court is restricted by a 1976 Supreme Court decision, which said Congress gave the president discretion to order trade actions under Section 232.

However, CIT Judge Gary Katzmann, one of the judges on the panel, rebuked the president’s use of Section 232 in a separate opinion that concurred with the other jurists.

Katzmann repeated his concerns about Section 232 in a preliminary decision on the 50 percent steel tariff on Turkey that struck down the federal government’s motion to dismiss the case. Transpacific Steel, a US importer that lodged the complaint earlier this year, will likely request a motion for summary judgment at the CIT.

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