Heavy-handed penalties resulting from a Section 232 investigation into steel imports could end up hammering the industries in the United States that they are designed to protect, trade experts warned.
U.S. trade partners could retaliate with both World Trade Organization (WTO) challenges and tit-for-tat tariffs against
U.S. exports of everything from metallurgical coal and petroleum products to cheese and fertilizers, they said.
As sure as day follows night, we will see retaliation. ... and steel may well suffer, Richard Chriss, executive director at the American Institute for International Steel, said on May 19 during the AIIS inaugural Steel-Con steel supply chain conference in Houston.
A decision on penalties in the 232 probe could come from the White House as soon as July if President Donald Trumps administration continues to push the investigation forward with undue haste, according to Frederick Waite, a lawyer at Vorys, Sater, Seymour & Pease LLP in Washington.
Commerce Secretary Wilbur Ross initiated the case in April, and the information gathering phase is likely to be completed by the end of May after only one hearing, he said. One potential reason for the speed is that the decision was made long before this process was initiated. And were just going through the motions, Waite said.
Commerce by law has nine months to investigate and prepare a report, and the president another three months to decide on whether and how to take action. The uncertainty over what the administration might do has sucked the oxygen out of trade debates over the past 45 days, Waite said. If there is a sledgehammer approach in this 232 caseacross the board duty increase or quotasthat would have a potentially devastating (effect on the) manufacturing sector and the U.S. economy as a whole.
U.S. automotive plants would close long before any benefits were realized by the steel industry if Trump took action against steel from Canada, Mexico, Japan and Germany, he said. You would get blowback, and the blowback would hit those people that were ostensibly trying to help. ... It could be a disaster, not just in terms of a potential trade war ... but on U.S. manufacturing.
In the meantime, traders need to make sure that their force majeure clauses include language about disruptions caused by government action, Marc Hebert, a partner at law firm Jones Walker LLP in New Orleans, said. Thats not only because the definition of national security in the 232 could be broad and duties high, but also because other Trump administration policies could significantly slow cargoes and drive shipping costs higher.