WASHINGTON — Just two days before tariffs on foreign-made steel and aluminum are scheduled to take effect, the Trump administration has yet to make public its plans for how the import levies will work in practice – creating confusion for its closest allies.
In recent days, top steel suppliers such as Brazil, South Korea, Japan have complained that the office of the U.S. trade representative has yet to establish a process for countries to apply for tariff exemptions, leaving it unclear if any will be granted in time to forestall billions of dollars in border charges.
“We’re waiting for an indication of the procedure for us to make our proposal,” said Sergio Amaral, Brazil’s ambassador to the United States. “There’s no indication by the USTR as to how this is going to work.”
The White House promised earlier this month that countries could ask for a waiver from the new import taxes of 25 percent on steel and 10 percent on aluminum. Only countries with a U.S. security relationship are eligible and they must propose alternative ways of addressing administration concerns over rising import figures.
But with time running out, no official guidance on how to apply has been made public, leaving diplomats baffled. The delayed rollout raises the risk of disrupting trade between the U.S. and some of its closest allies.
“It’s very hard to predict what the final outcome would be,” said one South Korean official, who would only discuss confidential discussions if granted anonymity. “But we will know soon. The 23rd of March is right around the corner.”
LOOKING FOR CLARITY
Foreign officials this week cycled through Washington in hopes of gaining clarity about the administration’s plans. Cecilia Malmstrom, the EU’s trade chief, arrived Tuesday for meetings with Commerce Secretary Wilbur Ross and other administration officials, vowing in a tweet that she would “insist that the EU as a whole is excluded” from the tariffs.
The Commerce Department said Wednesday that Ross and Malmstrom would “launch immediately a process of discussion” on trade issues, including steel and aluminum, “with a view to identifying mutually acceptable outcomes as rapidly as possible.”
Peter Altmaier, the German minister for economic affairs and energy, met with Ross one day earlier in hopes of heading off a trade war between the U.S. and EU. The EU has made public a 10-page itemized list of U.S. products that could be targeted for retaliatory measures if the steel and aluminum tariffs take effect on March 23.
Japan’s economy minister and foreign affairs minister have met directly with U.S. Trade Representative Robert E. Lighthizer. But “the specific process for obtaining a country exemption from the tariffs established by President Trump’s proclamation on steel and aluminum has yet to be disclosed,” the Japanese embassy in Washington said Tuesday.
On Capitol Hill Wednesday, Lighthizer told the House Ways and Means Committee that the import taxes will not apply to countries that have begun talks with the U.S., likely including South Korea, Argentina, Australia and the EU. He said talks with Brazil, the No. 2 steel supplier to the U.S., may begin soon.
“Countries will get out as we come to agreement. Some will be in position where the duties will not apply to them in course of negotiations,” he said in his first public comments on the matter. “Our hope is end by the end of April we (will) have this part of the process resolved.”
TAKEN BY SURPRISE
The president’s sudden March 8 decision to announce the measures, citing a threat to national security, took aides and allies by surprise. On a call with reporters to explain the move, a senior administration official provided conflicting statements about whether all countries or just those with U.S. security ties could seek waivers.
Lighthizer’s subsequent assignment to oversee the exemption process, which could involve dozens of countries, comes at a time when his office remains thinly staffed.
“They want to cut deals with everybody. But they’re not set up to do that in real time,” said William Reinsch, a former Commerce Department official.
Trump imposed the tariffs under a little-used provision in U.S. trade law that allows such measures in the case of threats to national security. That rationale has irked several of the countries targeted, such as Japan, South Korea and Germany, which are both steel suppliers and longtime American allies.
In 2017, the U.S. imported 34.6 million metric tons of steel from 85 countries.
Trump exempted from the tariffs Canada, the U.S. market’s leading source of steel, and Mexico, ranked fourth, at least while talks aimed at renegotiating the North American Free Trade Agreement make progress. The president also said that if he allows some countries to escape the tariffs, he may raise the import levies on others.
Edward Alden, a trade expert at the Council on Foreign Relations, said he doubts that many other countries will evade Trump’s new taxes. “If you exclude Europe, why not Japan? Then pretty quickly the economic significance of the tariffs get whittled down to something more symbolic,” he said.
Brazil offers a good illustration of the complexity involved in clamping down on market distortions that most analysts blame on China’s excessive production of industrial metals.
The Latin American giant buys about $1 billion worth of metallurgical coal from U.S. mines and uses it to produce semifinished steel, which are then sold to U.S. customers for use in making finished steel products.
“We provide inputs that make U.S. steel more competitive,” Amaral said.
Administration officials have said that exempting too many countries from the tariffs might permit Chinese steel to enter the U.S. via those countries. But shipping steel from China to Brazil costs more than twice as much as sending it to East Coast ports in the U.S., making such transshipment impractical.
Brazil, a U.S. defense treaty ally, also has 16 trade levies designed to keep Chinese steel out of its market.
Amaral, who has met with several members of Congress to plead Brazil’s case, said he is “confident” that ultimately the country will be spared the U.S. tariffs. “There is no argument that will justify these measures being taken,” he said in an interview.
Lighthizer shared with European Union officials five general criteria for weighing exemption requests including a country’s level of cooperation with U.S. aims at the World Trade Organization, its willingness to keep its metals exports at 2017 levels and its handling of trade with China, according to a former U.S. trade official familiar with the discussions.
Officials from Hong Kong, which accounts for 0.2 percent of U.S. aluminum imports, said they have tried in vain to contact officials at the White House, State Department and other agencies seeking clarification.
“We are up for seeking an exemption. But we don’t see any specific procedures for doing so,” said Clement Leung, Hong Kong commissioner for economic and trade affairs.
The Commerce Department is in charge of a separate process that permits companies to win approval to import steel and aluminum products that are not made in the U.S. without paying the new tax. Applicants must complete a five-page Excel spreadsheet and file a separate form for “each distinct type and dimension of steel product to be imported,” the department said.
Commerce is getting a late start. In 2002, when the U.S. last imposed steel tariffs, the exclusion system was established four months before President George W Bush announced the trade measures.
But Reinsch, an international business specialist at the Center for Strategic and International Studies, said that the process should operate in a straightforward manner, now that it is up and running. “Commerce knows how to do that,’ he said.
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