Section 232 tariffs on aluminium and steel raised $3.6 billion in their first nine months, and revenues for the last two months are likely to push that figure up by around another $1 billion, US government data shows.
That figure would be enough to cover the shortfall in funding sought by United States President Donald Trump for border security. In other words, aluminium and steel tariffs could fund a border wall.
The majority of the money raised by tariffs so far has come from steel. Duties collected since the tariffs took effect in March total $2.76 billion in the nine months to November, according to data from the US International Trade Commission (ITC).
Steel tariffs revenue started slowly - achieving $1 million in March and $2 million in April - before it started to pick up. The slow start is understandable because even though tariffs began on March 23, Canada, Mexico and the European Union were not included until June 1.
In May, steel tariffs brought $105 million into government coffers, but it was not until the next month that duties collected soared to $421 million and continued in this vein over the next several months.
In July, steel tariffs raised $469 million, peaking at $474 million in August before dipping in September to $418 million. Duties collected on steel raised $444 million in October and $424 million in November. Using an estimated figure of $430 million for each of December and January, this could put revenues on Section 232 steel tariffs from inception to the end of January at $3.6 billion.
Aluminium has contributed less than steel in revenue terms but is significant nonetheless.
The first month that tariffs were applied raised $3 million from aluminium, rising to $8 million in April and $46 million in May. Similar to steel, aluminium duties collected from Section 232 leapt higher in June, trebling to $138 million.
In July, aluminium tariffs raised $150 million, their peak in data released so far, and dipped slightly to return to $137 million in August, $132 million in September, $133 million in October and $130 million in November.
Using an average of $130 million for December and January, this could put revenues on Section 232 aluminium tariffs at $1.14 billion.
This means that combined, Section 232 tariffs on steel and aluminium could have already raised $4.7 billion.
In the context of the current political backdrop in the US, this is significant.
US aluminium premiums initially slipped lower when the tariffs were introduced, although jumped to near three-year highs when the US government imposed sanctions on imports from Russian producer UC Rusal the following month. The P1020 Midwest premium peaked at 23 cents per lb on April 10 and has drifted lower to sideways since, with Fastmarkets assessing the market at 19.25-19.50 cents per lb on February 12.
Fastmarkets’ daily US Midwest hot-rolled coil index stood at $34.28 per hundredweight ($685.60 per ton) on February 13, down by 5.3% from $36.21 per cwt at the beginning of the year and off by 25.2% from a near 10-year peak of $45.84 per cwt recorded in July of last year.
On Thursday February 14, US lawmakers struck a bipartisan deal to provide almost $1.4 billion for fences and barriers along the southern border with Mexico as part of a broad funding package to avoid another federal government shutdown. Although, this figure falls short of the total $5.7 billion that president Trump has been seeking for a border wall.
But Section 232 revenues look likely to make up that gap, with money to spare. Perhaps there is no need to tap disaster funds, counternarcotic finance and military construction budgets after all, all of which have been mooted as potential sources for the shortfall in funding.
It is not really clear how things will change while the Section 232 exclusions process proceeds.
The Department of Commerce had expected around 4,500 exclusion requests with a response within 90 days; instead, it’s had over 50,000 requests with 86% taking more than 90 days to process and over half still pending. The US government shutdown will not have helped speed things up either.
Eventually these requests will be processed, a situation that will impact the revenues that the duties raise.
It’s also unclear how long Section 232 duties will last because they are part of a bigger picture series of trade and other political negotiations, including the US administration’s policy stance on manufacturing and global trade.
Yet as government data shows, the winners in the exclusions - in volume terms - so far have been Japan on steel and Saudi Arabia on aluminium.
In terms of applications, the most steel exclusions have been granted to Japan and China with 3,480 and 2,386 respectively, while the most aluminium exclusions have been granted to South Korea and China with 110 and 108 respectively.
On the other side of the coin, the data also shows that the exclusions process has most negatively impacted Canada, Brazil, Mexico and Turkey in terms of steel, and Canada and the United Arab Emirates with regards to aluminium, based on the volume of products approved as a share of 2017 imports.
If these countries are still bringing material into the US and paying the tariffs that makes the potential border security funding equation even more meaningful.