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US House opposed to broad 232 tariffs

Mar 08, 2018 | 09:50 AM | Michael Cowden

Tags  steel, aluminum, Section 232, tariffs, Congress, Mike Cowden


CHICAGO — More than 100 members of the US House of Representatives have spoken out against blanket tariffs against steel and aluminum imports.

“Tariffs are taxes that make US businesses less competitive and US consumers poorer,” the House members said in a letter issued early on Thursday March 7 - before a meeting at which the president was expected to sign off on the measures.

The signatories - including Representative Kevin Brady (R-Texas), chairman of the House Ways and Means Committee - warned that broad-based tariffs could lead to “unintended negative consequences to the US economy.” They suggested Trump enact “targeted” measures instead.

Trump last week said he wanted to impose a global tariffs imported steel and aluminum under Section 232 of the Trade Expansion Act of 1962, which allows the president to place restrictions on imports on national security grounds. The president’s choice was more draconian than any of the three remedies Commerce Secretary Wilbur Ross had suggested in February.

If tariffs are imposed, “fairly traded products” should be exempted and a “robust” exclusion process rolled out along with the duties, the House members said. Existing steel and aluminum contracts should be “grandfathered” in duty free, so as not to disrupt ongoing projects. And the remedies should be reviewed and reconsidered “on a short-term basis” to determine whether they are helping or hurting US workers and consumers.

The House letter was released on same day White House press secretary Sarah Sanders said during a briefing with reporters that the Section 232 tariffs would contain “potential carve outs” for Canada and Mexico—the United States' North American Free Trade Agreement (Nafta) partners—and perhaps for other nations as well.

Any decision on carve outs “would be country-by-country, and it will be based on national security,” she said, noting that she was “not aware” of any complaints filed at the World Trade Organization against the tariffs.

WTO director-general Roberto Azevêdo has warned that US duties could lead to a trade war.

Potential Nafta exemptions are a “large sigh of relief” for automakers and iron ore pellet suppliers whose supply chains span North America as well as for investors in Canadian and Mexican steelmakers such as Stelco, Ternium and Tenaris, KeyBanc Capital Markets analyst Philip Gibbs wrote in a March 7 research note. Nafta exemptions would also be a boon to ArcelorMittal’s slab re-rolling operations in Calvert, Alabama, for which Mexico “is a growing source of slabs.”

And relief for Mexican slabs could “embolden other slab re-rollers to advocate for imported substrate exclusions to level the playing field against a clear and present absence of a US merchant carbon slab market,” Gibbs wrote.

NLMK USA and California Steel Industries—which, like the Calvert mill, convert slabs—have warned that tariffs on foreign slabs pose a threat to their business model. NLMK has said any duties would jeopardize $600 million its Russian parent company might otherwise invest in the US.

“Perhaps the shadow of Gary Cohn still lingers,” Gibbs wrote in reference to Trump’s former top economic advisor, who is said to have resigned over the tariffs. “That said, we expect several more curveballs in the pending days with major trade agreements not concluded and nothing officially signed on the tariffs.”

The president was expected to sign off on the tariffs in the afternoon on Thursday, March 8. 

The United Steelworkers union has said Canada should be exempt from any tariffs.

But some Canadian steel suppliers are in the meantime playing the market cautiously, two service center sources said. That means shipping orders that have already been produced but not taking new orders because 25% tariffs would mean incurring a loss on new business.

Canada is the top foreign steel supplier to the US. It provided 6.12 million tonnes, or 16.6%, of the 36.87 million tonnes of steel the US imported in 2017. Mexico weighed in at No. 4, behind Brazil and South Korea, with 3.37 million tonnes.

What happens to Canada and Mexico is critical because the two countries together account for more than 25% of the steel imported by the US.

Trump has said he is using the threat of 232 tariffs to extract concessions from Canada and Mexico in a pending renegotiation of the North American Free Trade Agreement.

Michael Cowden 
mcowden@amm.com



 

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