President Donald Trump on Thursday signed formal proclamations imposing tariffs aimed at defending America’s steel and aluminum industries from foreign imports.
The tariffs are an “iron clad” measure aimed at defending industries vital to U.S. national security, a senior administration official said.
The orders impose a sweeping tariff of 25 percent on steel imports and 10 percent on aluminum imports. They will initially apply to all countries that export the commodities to the U.S. apart from Canada and Mexico, which will be granted a temporary reprieve while negotiations over the North American Free Trade Agreement (NAFTA) continue.
“Canada and Mexico initially will not pay those tariffs,” the senior administration official said.
The exemption for Canada and Mexico, however, will not be permanent or “open-ended,” according to Trump administration official. It is intended to regconize that the U.S. has what administration officials call a “security relationship” with each of Mexico and Canada and to give those two countries time to reach agreements on how to adjust their trading relationships with the U.S. to address the threat to America’s steel and aluminum industry.
For all other countries, the tariffs will begin to be applied in 15-days.
Despite the sweeping nature of the tariffs, the administration has built in flexibility to adjust the tariffs up or down in the future. Other countries will be able to apply for exemptions on the tariffs providing they can demonstrate “alternative means” for addressing the concerns that their steel and aluminum imports damage U.S. security interests. Those negotiations will be headed up by U.S. Trade Representative Robert Lighthizer.
The Trump administration’s orders mark a rejection of pleas from many in the Republican Party, including some of self-styled conservatives on Capitol Hill, to impose tariffs only on “bad actors” such as China. Administration officials insist that a narrowly tailored set of tariffs would be insufficient to address the security concerns raised by the deterioration of the steel and aluminum capacity of the U.S.
Largely as a result of earlier-imposed trade sanctions, the U.S. imports only a small fraction of its steel directly from China, which is responsible for 50 percent of the world’s steel production. The massive amount of steel China “dumps” on the global market depresses prices in the U.S. despite the lack of direct imports, according to administration officials.
“Both aluminum and steel are severely under threat. And in the case of aluminum, it is being driven to extinction,” a senior administration official said.
The Trump administration describes the national security rationale for the tariffs as “unassailable.” It says that healthy steel and aluminum industries are important not just for the national defense industrial base–the ability to build war-fighting planes, tanks and ships–but also infrastructure needs that are critical to national security. As well, maintaining a workforce skilled in steel and aluminum manufacturing is viewed as a national security priority by the administration.
Criticism of the tariffs has mostly ignored the security rationale, focusing instead on potential economic pitfalls. The Trump administration says these worries are baseless. “Fake news,” in the words of a senior administration official.
“There will be no significant downstream price effects, no inflation effects,” according to the official. “And since there are no significant price effects, there will be no job losses due to the tariffs.”
The administration can already point to economic benefits from the tariffs. U.S. Steel has announced that it will reopen a plant in Granite City, Illinois that will employee 500 workers. Century Aluminum has said it will make a $100 million investment to restart an idle plant that makes military grade aluminum.
The administration denies that the provisional exemptions for Mexico or Canada, or the potential for waivers for other countries, represents a softening of its trade stance. Instead, the possibility of waivers is an “added benefit that allows us to deal with security relationships,” an administration official said.
If tariffs are waived or lowered for some countries, they will have to be adjusted upward for other countries, according to the administration official.
“The tariffs will be set based on a calculus designed to ensure a healthy steel and aluminum industry,” the official said.
That includes making it possible to make sure steel and aluminum producers can “earn a decent rate of return.”
“If we agree with Canada and Mexico we would have to raise tariffs on other countries, modestly,” the official said.
Thursday’s actions by the administration mark the conclusion of a process that began last year when the president ordered the Commerce Department to examine the impact on national security of steel and aluminum imports. That inquiry, called a Section 232 investigation after of the portion of the Trade Expansion Act of 1962 where it is authorized, concluded earlier this year with a recommendation that the administration impose sanctions to protect the industries.