He did it. In his continued push for “fair and reciprocal” trade, President Donald Trump has followed through on his promise to impose a 25 percent tariff on steel and 10 percent tariff on aluminum from Canada, Mexico and the European Union.
The three had been temporarily excluded from the tariffs when Trump issued his proclamation in March, pending further negotiations, but having not made progress, on May 31, Trump followed through on his threat.
Now, to get the tariffs lifted, Canada and Mexico will have to make it a part of the renegotiations on the North American Free Trade Agreement (NAFTA). As for Europe, the countries there will need to come up with similar concessions in order to get out from under the tariffs.
Similar deals were worked out with Australia, Argentina, South Korea and Brazil for certain exemptions to the tariffs. So, there is a light at the end of the tunnel, but there has to be concessions to the U.S. in order to get them.
The U.S. received, in 2017, 17 percent of its steel imports from Canada, 9 percent from Canada and 4 percent from Germany, according data compiled by the International Trade Administration.
The tariffs came on the heels of a 16 percent increase in steel imports in 2017 to 34.5 million metric tons from 2016 when it was 30 million metric tons.
In the meantime, U.S. production of steel only increased 3.4 percent in 2017 according to the International Trade Administration to 81.6 million metric tons from 78.5 million metric tons.
This flooding of U.S. markets by dumping subsidized steel products is supposed to drive down prices, making it harder for domestic producers to maintain market share. The imported steel is tends to be much cheaper.
The excess supply problem is compounded by China’s own flooding of global markets. China currently has a 50 percent global market share in steel. This absolutely impacts trade flows into the U.S., even indirectly, by affecting global prices and trade volumes.
The Commerce Department justified its recommendation for instituting the tariffs in March, writing: “Domestic steel production is essential for national security applications. Statutory provisions illustrate that Congress believes domestic production capability is essential for defense requirements and critical infrastructure needs, and ultimately to the national security of the United States.”
The Department recommended that the U.S. use at least 80 percent of its annual capacity including imports, but as of now, only 72.3 percent is utilized because of this continued flooding of global and domestic markets. The report found “Utilization rates of 80 percent or greater are necessary to sustain adequate profitability and continued capital investment, research and development, and workforce enhancement in the steel sector.”
By capping how much steel will be imported into the U.S., the Trump administration is exercising its constitutional authority to implement the laws Congress has put in place to stop such dumping practices, and to regulate trade with foreign nations.
This is what Trump ran on in 2016, to put America first in trade, and he owes his Electoral College victory because he picked up the Rust Belt states of Ohio, Michigan, Pennsylvania and Wisconsin, with union and conservative households alike putting him over the top.
Now, for alarmists who see a trade war behind every corner, this is by no means the end of the story. President Trump in his proclamation has held out the prospect that concessions could be had with our Canadian, Mexican and European trade partners. It’s all a part of his art of the deal.
That’s what fair and reciprocal means. If they give, we can give, too, and the tariffs can be reduced, just as they were with Australia, Argentina, South Korea and Brazil, to varying degrees. But no more freebies.