The exclusions process for companies and countries seeking relief from the Section 232 tariffs on imports of steel and aluminium has had some interesting consequences.
Notably, in the event of a national security issue - which Section 232 was designed to address - the United States would theoretically rely on Japan for its steel and Saudi Arabia for its aluminium.
Those countries have been granted the highest volume of exclusions: more than 1 billion kg of Japan-origin steel, equivalent to around 62% of the country’s shipments into the US in 2017, and more than 1.6 billion kg of aluminium from Saudi Arabia, around 2,379% of that country’s shipments to the US in 2017.
As of mid-February, around half of the exclusions requests for material from Japan and Saudi Arabia have been dealt with by the US Department of Commerce.
Japanese steel has so far requested more than 9,000 exclusions, with 38% approved and 16% denied. The rest are pending. Meanwhile, requests for exclusions on aluminium produced in Saudi Arabia total 37, with 18 approved, none yet denied and the remainder awaiting a decision.
The Saudi Arabian material is sourced from US aluminium producer Alcoa’s joint venture in the country, Ma’aden Rolling, with 19 exclusion requests from Ball Metal Beverage Container approved and requests still pending from Ball plus Crown Cork & Seal USA and Elixir Extrusions.
And shipment data highlights the changes to international trade flows that have resulted from the tariffs and the exclusions process.
For example, Saudi Arabia was previously only the 11th-biggest aluminium supplier to the US in 2017, accounting for just 2.3% of the total volume sent by the largest supplier, Canada.
Japanese shipments of steel to the US were already relatively high - the country ranked as the sixth-largest US steel supplier in 2017. But shifts among the top-five US steel suppliers are revealing.
The largest steel exporter to the US in 2017 was Canada. To date, the equivalent of 2% of the country’s 2017 shipments have been granted exclusions, with two-thirds of applications still pending.
No applications for exclusions on steel from Brazil, the second-largest exporter in 2017, have been approved, with more than 98% of applications still pending.
For Mexico, the third-largest steel exporter in 2017, the equivalent of 1% of the country’s 2017 shipments have been granted exclusions, with 54% of applications pending.
Russia is still waiting for 99% of its applications, and has had only 0.02% of the equivalent of its 2017 volume approved.
The fifth-largest steel exporter, Turkey, has seen exclusions granted for just 0.1% of its 2017 import levels, with most denied and the country waiting on 53% of its total applications so far.
The question, then, is where the US will get its necessary imports of steel.
In volume terms after Japan, it would be Thailand (which has been granted the equivalent of 288% of its 2017 shipments), the Netherlands (with 91% of 2017 levels approved) and Germany (with 23% of 2017 levels approved).
These three countries have been approved for exclusions on steel volumes that are still some way short of Japan’s volume total in 2017. But, with the addition of China, which has been granted the next-largest volume of exclusions to date, the shortfall would be eliminated.
In aluminium, the picture is even more interesting, given the initial rhetoric surrounding the introduction of the Section 232 tariffs.
Canada, previously the largest exporter of aluminium into the US, has seen 0.2% of its 2017 import levels granted exclusions and is waiting to hear back on 97% of its total applications.
Russia, the second-largest exporter - which saw aluminium producer UC Rusal get hit with sanctions for most of 2018 - has had nothing approved.
The approval figure for the third-largest aluminium exporter into the US, the United Arab Emirates, is also zero, with all applications still pending. For Bahrain, the fifth-largest, the situation is a little better, with 10% of 2017 import levels approved and 96% of its applications pending.
But the fourth-largest aluminium exporter into the US has done quite well. China has already been granted exclusions for volumes totaling 86% of its 2017 import levels, although that country has 81% of its applications pending.
Given that the US and China are embroiled in a trade war, centered on allegations that China dumps excess steel and aluminium into the US, this is an interesting turn of events.
Even more surprising, the exclusions process has seen China move from the fourth-largest US aluminium supplier to the second-largest. To date, Canada, Russia, the UAE and Bahrain combined have won approval to ship just 5.3% of the amount for which China has been granted exclusions.
As noted by Christine McDaniel of the Mercatus Center in Arlington, Virginia, given the relatively large amounts of approved tariff exclusion requests on imports from China, there is doubt about the US administration’s assertion that imports of steel and aluminium were a national security threat in the first place.