Trump announcement on tariffs short on details

5 March 2018 11:46am
US Flag on White Backgroud

1 March 2018. By Adam Sigal.

Key questions remain unanswered about who will be affected and how by steel and aluminum tariffs announced by the White House on Thursday.

In a session with steel and aluminum business leaders, US President Donald Trump said he intends to impose a tariff of 25 percent on steel imports, and 10 percent aluminum on imports. The announcement came without further details or a timeline for when restrictions will go into effect. Trump said, variously, that the tariffs will last for an "unlimited period" or "for a long time."

And the lack of details is already creating confusion. The President of the European Commission, Jean-Claude Juncker, said the EU “will not sit idly while our industry is hit with unfair measures that put thousands of European jobs at risk.” But the US has announced an intention to implement tariffs on specific countries, jurisdictions or products.

Other countries and companies have also published responses that jump to conclusions that aren't necessarily warranted .

After Trump's remarks, Press Secretary Sarah Huckabee Sanders clarified that the details have yet to be ironed out and that the president’s comments only reflect his "current intentions".

Sanders said an announcement will take place next week.

Observers appear to be assuming that the president will adopt a policy similar to the one suggested by the US Department of Commerce in February and will impose on all countries a blanket 24 percent tariff on steel and a 7.7 percent tariff on imports of aluminum.

The president isn’t shackled by those recommendations, though.

The Commerce Department could also be empowered to consider applications for exemptions on products or countries even after tariffs go into effect. Canada, a country that buys 50 percent more steel from the US than it sells back, has promised swift retaliation if its sales to the US are curbed.

The White House could also put out of a list of product exemptions. The US beverage industry, which has a strong lobby and uses lightweight aluminum sheet in cans, has asked that its inputs be exempt from the tariffs.

The domestic aluminum industry, however, remains concerned that exceptions will incentivize overseas manufacturers to switch into the exempted products, driving down prices in those markets further and preventing recovery of the US industry.

Some countries that would be sensitive to broad tariffs would be almost completely exempted if certain products are left out.

Until the details of product exemptions are made public, individual countries and companies can't know if they will be affected. Canada exports mainly steel flats and long products to the US; South Korea sells mainly oil country tubular goods and other high end pipes; and Brazil sells largely semi-finished goods. Mexico sells the same categories as the other three countries, as well as more downstream steel products, such as nails, screws and car parts.

Perhaps the biggest remaining question is how many downstream products will be subject to the tariffs. The US won’t put tariffs on every product made from steel. Products that are predominately steel could be subject to tariffs, even if they have undergone some amount of processing or if steel is only a part of an imported product.

In previous Commerce Department decisions, after assessing duties on aluminum extrusions, the Commerce Department began to extend those protections to many products primarily made from extrusions — including refrigerator door handles, car parts and appliance assemblies.

The US could follow this example with the steel and aluminum tariffs that the president foreshadowed on Thursday, or restrict the tariffs to flats and coils.

Trump hasn’t committed himself to anything, and anything is what companies and countries might yet get.