Trump Postpones Steel Tariff Decision for EU, Other U.S. Allies

May 02, 2018

WASHINGTON—President Donald Trump eased trade pressure on top U.S. allies Monday, giving the European Union and some nations outside the bloc more time to negotiate deals that would exempt them from U.S. steel and aluminum tariffs.

[Michael C. Bender and William Mauldin | April 30, 2018 | WSJ]

The White House said broad tariffs of 25% on steel and 10% on aluminum—already in effect against China, Russia, Japan and others—won’t take effect for the EU Tuesday as previously planned. Instead, Europe will have an additional month to keep talking with the U.S. about a new pact to avoid the tariffs.

As expected, Canada and Mexico were given an extension, also until June 1, while talks about rewriting the North American Free Trade Agreement proceed.

The White House said it has agreements in principle with Argentina, Brazil and Australia to avoid the tariffs. While the details haven’t been finalized, the countries have agreed to quotas, and their exports won’t face U.S. duties on Tuesday, a senior administration official said.

The Trump administration is backing broad restrictions on the trade of metals to limit the direct and indirect effects of Chinese steel and aluminum production on the U.S. market. “In all of these negotiations, the administration is focused on quotas that will restrain imports, prevent transshipment, and protect the national security,” the White House said in a statement.

Top Trump administration trade officials met with the president late Monday afternoon to decide on a course of action as a self-imposed midnight deadline approached, with some allies uncertain until the last minute about which direction the U.S. would choose.

Uncertainty was especially heightened for the EU. French President Emmanuel Macron and German Chancellor Angela Merkel both made personal visits to the White House last week but left without visible assurances or concessions on trans-Atlantic trade issues.

“The decision lies with the president,” Ms. Merkel said in a press conference with Mr. Trump.

Following through on threats to impose tariffs would have escalated tensions between the U.S. and its European allies at a moment when other high-stakes discussions were under way on the Iran nuclear deal, U.S. sanctions against Russia, how to confront economic challenges from China and other issues.

A spokesman for the EU had no immediate comment Monday evening.

A spokesman for the U.K. government, which is negotiating an exit from the EU, called the White House move “positive” and said, “We will continue to work closely with our EU partners and the U.S. government to achieve a permanent exemption, ensuring our important steel and aluminium industries are safeguarded.”

Mr. Trump announced the global tariffs in March, seeking to relieve the U.S. steel and aluminum industries, which had been buffeted in recent years by cheap import competition. A glut of production from China found its way through global markets into the U.S., despite U.S. barriers.

Trade hawks in the Trump administration saw implementation of tariffs against a wide range of trading partners as a way to wall off the U.S. domestic industry from these global forces. Labor groups, the domestic steel industry and their supporters want to limit the economies that get exemptions to the tariffs.

“I’m not worried by temporary extensions, but I don’t believe they should be unconditional or indefinitely left in place,” said Scott Paul, president of the Alliance for American Manufacturing, which backs domestically focused industry in the U.S. “There’s some good evidence the pressure applied by the tariffs, or the threat of tariffs, is squeezing China.”

Lawmakers, business groups and foreign officials lobbied for an array of permanent exemptions from the tariffs, with some countries touting their strategic cooperation with Washington or bringing offers to crack down on allegedly dumped or subsidized steel from China.

The White House is using a decades-old law to impose the steel and aluminum tariffs on trading partners on national-security grounds. Trump administration officials have argued that a shrinking U.S. metals industry threatens defense capabilities and economic security. But many U.S. lawmakers were wary of punishing the EU, which includes most nations in the North Atlantic Treaty Organization.

In a warning to Mr. Trump, the EU threatened to retaliate against more than $3 billion in U.S. exports, including items from the home states of House Speaker Paul Ryan and Senate Majority Leader Mitch McConnell, both Republicans. The threat of retaliation will now be put on hold but could re-emerge if the two sides don’t hammer out a deal.

Europe’s steel industry was bracing for the worst, and some complained about the uncertainty of the last-minute U.S. decision-making.

“To prepare you need to know what’s going to happen,” Charles de Lusignan, a spokesman for the Eurofer trade group representing all European steelmakers, said before the U.S. decision.

Now that the EU has more time, officials from both sides will need to find common ground if they want to make the exemption permanent. Some European officials said the bloc wouldn’t negotiate under threats, and some trade advisers in Washington doubted whether additional weeks will be enough to yield a deal between the EU and the Trump administration.

One sticking point is whether European allies will accept quotas on their metals exports, something they resisted, and which they said violated rules of the World Trade Organization.

South Korea, by contrast, accepted limits on exports, often called “voluntary export restraints,” and won a long-term tariff exemption. Seoul agreed earlier with U.S. officials on a path to avoid the tariffs, and the White House said Monday a final agreement had been reached.

In Washington, many GOP lawmakers have criticized the broad reach of the metals tariffs, backed by U.S. companies that import steel and aluminum, which say the levies raise the price of everything from beer cans to auto parts.

The European steel industry has already felt the fallout of U.S. tariffs. Big exporters to the U.S.—countries like Brazil, Turkey, Russia, South Korea, Egypt and China—have ramped up exports to the European market to avoid American trade barriers, dragging down prices for domestic producers.

Steel imports in the EU rose 300,000 metric tons to 2.9 million tons in the first quarter of 2018, versus the same period a year ago, according to Eurofer. The European Commission, the bloc’s antitrust regulator, is considering whether to impose safeguards to prevent a surge of imports.

“We are already seeing now the trend toward massive trade redirections into the open, European market,” said Hans Jürgen Kerkhoff, president of the German Steel Federation.

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