Steel and Aluminum Tariffs Muddy Trade Picture

March 8, 2018

President Trump said he will impose tariffs of 25 percent on steel imports and 10 percent on aluminum imports on national-security grounds.  Agricultural exporters fear their products could be targets for retaliation.  Late in the week, the president tweeted that “trade wars are good, and easy to win,” suggesting he will be undeterred by farm-state worries.

Among the top sources of both steel and aluminum imports is Canada, while Mexico is a significant source of imported steel.  Besides being partners in the North American Free Trade Agreement, the two countries are among the top export destinations for many farm and food items, including eggs and egg products.

Some in the Administration, including the Pentagon, want to target tariffs on only a small number of countries, probably excluding Canada.  But in an early-morning tweet March 5, Trump threw those ideas into doubt, saying exemptions only made sense if the U.S. gets what it wants in slow-moving NAFTA re-negotiations.

The U.S. government has not yet taken any formal action. Trump’s statement about the tariffs came at a meeting with industry executives that White House officials had said would not feature an announcement, and officials were taken by surprise by the president’s statement, according to multiple press reports.  The official announcement of the tariffs is expected sometime this week.

The so-called “Section 232” tariffs will be imposed under a 55-year-old law that permits import limits if necessary for national security, regardless of whether the products are being fairly, or unfairly, traded.  Massive worldwide overcapacity in steel and aluminum is blamed on China by many observers, including the U.S. Department of Commerce.  However, China is only a minor source of U.S. imports for these products.

In addition to Canada, the European Union threatened retaliation.  China expressed opposition but did not formally threaten to retaliate against U.S. goods.  But that nation’s response is probably the greatest fear for U.S. producers of soybeans and other major export commodities.