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Trump Steel and Aluminum Tariffs Analysis

Understanding the implications for key metals of 232 and other trade actions.

Economies around the world are enjoying the kind of expansion they have not seen in more than decade, but uncertainty surrounding the potential for protectionist trade wars threaten their upward trajectory

The global economy is on track toward 3.3 percent growth in 2018 and 2019 as expansion becomes more broad-based, encompassing emerging and developed economies. Rising tensions between the US and Mexico, Europe, Canada, and China over trade policy have yet to alter this forecast, but clearly remain an issue that we are monitoring closely.

What has happened so far

  • US President Donald Trump, utilizing powers designated under Section 232 of the Trade Expansion Act of 1962, imposed import tariffs on steel and aluminum that took effect on 23 March 2018. Significant – and supposedly final – changes were imposed on 1 June.
  • Steel prices in the US are already well above almost any country, with 50% premium over Europe and approximately 80% over China.
  • Likewise, the aluminium tariffs have pushed US aluminium prices above those in every other region. Moreover, the US Commerce Department announced on June 19 a preliminary finding that Chinese common alloy aluminium sheet imports had been sold at below market prices and assigned anti-dumping duties of over 100% on selected Chinese producers.
  • The war of words between President Trump and Canadian Prime Minister Justin Trudeau following the G7 summit, along with the imposition of tariffs on Canada and Mexico, seriously undermines the ongoing North American Free Trade Agreement (NAFTA) negotiations, increasing the likelihood of the talks will be suspended and that of a unilateral US withdrawal.
  • After losing its exemption from 232 tariffs, Canada retaliated by imposing mirror tariff rates on US exports – 25% on steel, 10% on a list of other goods. The US barely imports aluminum from Canada, so Canada targeted other products.
  • After the Trump administration's announcement that the EU would face a 25% tariff on steel and a 10% tariff on aluminum from 1 June, EU member states across the board condemned the US action and implemented retaliatory measures with “rebalancing” tariffs on a range of US imports to go into effect 22 June.
  • A particularly significant measure of Section 232 that has great impact on the energy industry, is the imposition of steel quotas on Argentina, Brazil, and South Korea. IHS Markit analysis shows that multiple categories of energy pipe and tube are at or near their annual quota. Consumers will not be able to import any additional tubulars, causing disruption for drilling and pipeline operations.
  • On 15 June, US President Donald Trump approved tariffs on Chinese goods, including a 25% tariff on USD50 billion of Chinese exports to the US. Chinese retaliation is likely to prove disruptive for both countries, affecting domestic development targets, with measures probably focused against politically sensitive sectors and regions.
  • US administration was also instructed to prepare an additional list of imports for China worth $200 billion, which may be subject to an additional 10% tariff, should China decide to retaliate against the restrictions announces on 15 June.
  • The European Commission imposed its own safeguard measures on July 18, levied upon 23 steel products. The measures last for 200 days, the maximum allowed under WTO rules. The average level of imports for 2015-2017 are tariff free. Additional tons face a 25% tariff.

Indicators of a changing risk environment

Increasing risk

  • The US Department of Commerce is now investigating imports of vehicles and auto parts as a national security threat under Section 232, as an indicator of tariffs to be imposed on the sector.
  • The Mexican government facing increased domestic pressure from business groups, unions, the media, or opposition politicians, to take new retaliatory actions against the US, as an indicator of new tariffs being imposed by Mexico and the termination of NAFTA.
  • Ongoing pressure by the US on China's industrial policy through investment restrictions, export controls, or targeted restrictions, such as implementation of the proposed limitations on visa terms to Chinese nationals studying in the US, increases the likelihood of Chinese pushback and negotiations breaking down.
  • More aggressive responses by the Chinese government, including administrative restriction on the operation of US multinationals operating in China.

Decreasing risk

  • Legislative proposals by congressional Republicans to limit the president's powers to invoke the Section 232 provision would increase the probability of the administration paring back the tariffs' scope.
  • Broad exemptions for the EU emerging from high-level talks between the US and the EU would indicate increased US flexibility with respect to the universality of the tariffs.
  • Conciliatory words between Presidents Obrador of Mexico and President Trump of the United States give hope of de-escalation of trade issues, including NAFTA renegotiation.


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