Steel and aluminum trade war: bleak perspectives for ironing out
In a controversial move, seen by many as a declaration of a trade war, on March 8th United States President Donald Trump signed a pair of proclamations setting up new import tariffs on steel and aluminum. The new tariffs will amount to 25% on steel and 10% on aluminum, ostensibly to counter cheap imports and protect domestic manufacturers.
Mr. Trump's authority to impose the tariffs is based on a provision that allows the president to restrict trade because of national security interest under Section 232 of the Trade Expansion Act of 1962. The argument behind the new import tariffs is that the current ones weaken internal economy, thus posing a threat to national security. The primary source of this threat, according to Mr. Trump, is China.
The Trump administration has long criticized China for flooding the market with cheap commodities. However, although the country is indeed the world's largest steel exporter, it is only the 11th-largest import partner of the US, accounting for 2% of total imports of steel. In 2016, the US implemented trade taxes on different types of imported steel, causing Chinese exports to the US to drop by two‑thirds. In the first nine months of 2017, the US imported 26.9 million tons of steel, an increase from 22.5 million tons in 2016. Canada accounted for the largest share of imports (16%), followed by Brazil (13%), South Korea (10%), Mexico (9%), and Russia (9%). Nevertheless, the American steel industry has argued that China has a backdoor to the US markets through transshipment, whereby third-party countries buy Chinese steel and modify it before exporting to the United States. As no legitimate data on transshipment is available, though, the actual scale of this practice is difficult to determine.
U.S. President Donald Trump is after signing a proclamation to establish tariffs on imports of steel and aluminum at the White House in Washington, U.S., March 8, 2018. REUTERS/Leah Millis
