By invoking a rarely used law from the cold war era, Trump could limit imports of goods deemed critical to national defence and satisfy his America first policy
Chinese and European diplomats have warned Donald Trump against reported plans to restrict imports of steel and aluminum a strategy that risks triggering a global trade war.
By invoking a rarely used law from the cold war era, the US president could limit imports of goods deemed critical to national defence and satisfy the America first elements of his support base.
But on Friday, China and the European Union (EU) both told the World Trade Organisations (WTO) Goods Council that section 232 tariffs could not be justified on national security grounds, while others suggested that it could provoke retaliation.
Washington is looking to reduce excess global production capacity of steel, particularly in China. Trump, backed by a small group of allies, told a meeting of top officials at the White House on Monday that he wants to impose tariffs as high as 20% on the metal, as well as potentially on other imports such as aluminum, semiconductors, paper and washing machines, according to the news website Axios.
One official estimated the sentiment in the room as 22 against and 3 in favor but since one of the three is named Donald Trump, it was case closed, Axios reported. Everyone else in the room, more than 75% of those present, were adamantly opposed, arguing it was bad economics and bad global politics. At one point, Trump was told his almost entire cabinet thought this was a bad idea. But everyone left the room believing the country is headed toward a major trade confrontation.
Asked about the reports on Friday, Sarah Huckabee Sanders, White House deputy press secretary, said: No, at this point the president has not made a final decision in regards to the tariffs issue.
The White House has reportedly delayed publication of a section 232 national security review of the domestic steel industry until after Trump has spoken with G20 leaders in Germany next week. National economic adviser Gary Cohn said: The premise of that report we will use as an opportunity to talk with many of our trading partners around the world about whats going on in steel.
Trumps tone was clear when he met South Korean president Moon Jae-in on Friday to renegotiate their bilateral trade agreement signed by Barack Obama, which he described as a rough deal for the United States.
Later, when the leaders made joint statements in the White House rose garden, the US president again complained: Our trade deficit with South Korea has increased by more than $11bn not exactly a great deal.
As Moon looked on from the podium, the US president added: I have called on South Korea to stop enabling the export of dumped steel. These would be important steps forward in our trading relationship: very important steps. They have to be made. Not fair to the American worker if theyre not, and they will be.
Earlier, Cohn also took a swipe at China. He said: Much of our biggest problem on trade has to do with our economic relationship with China, and we have maintained a very large trade deficit with China, and it continues to grow.
China has many predatory practices in the way they deal with us, with intellectual property and trade barriers for us. Were forced to transfer technology into China, forced to have joint ventures in China. We have tariffs and nontariff barriers; unable to own companies in China, as well. And were dealing with all of their policies.
But the EUs representative at the WTO the arbiter of international trade rules since 1995 warned that the EU might suffer the most from US tariffs because Chinese exports are already largely subject to US restrictions and Canada and Mexico are likely to be exempt.
The trade diplomat from Russia, which called the debate on the issue, asked for details such as the timeframe and scope of potential tariffs, and also challenged the commercial justification for further US limitations on imports of steel and aluminium, Reuters reported.
The imposition of tariffs would also face significant domestic scepticism. Mireya Sols, a senior fellow at the Brookings Institution think tank in Washington, said: I think from every angle you look at it, its problematic move. It could be the first real step towards imposing a protectionist measure.
The grounds for invoking section 232 are dubious, she added. Steel is a very globally traded commodity. Only a small fraction of steel is used for defence purposes. It would encourage retaliation by other countries and a challenge in the WTOs dispute settlement mechanism.
Cosette Creamer, assistant professor of political science at the University of Minnesota, also raised concerns. I think ultimately it will depend on the remedy if any imposed and how the administration makes use of the investigation itself to push forward more collective responses to a very real problem: global excess capacity of steel and aluminum, she said.
I think there are more multilateral approaches and even unilateral responses that would be more appropriate. In other words, Im concerned about using the use of the national security justification and the slippery slope that might send us down. I think using the national security justification was a smart legal strategy in terms of the deference that the WTO will likely give such a determination. But I also worry about what any WTO challenge to duties if imposed would mean for the authority and legitimacy of the WTO dispute resolution system.
Nigel Cory, trade policy analyst at the Information Technology and Innovation Foundation, said such tariffs need to be put in context. Countries are allowed to raise tariffs as a trade enforcement tool to counter specific unfair trade practices, such as in anti-dumping cases where tariffs are used to counter imports of a specific product from a specific country that the importing country assesses is being sold (unfairly) below the cost of production. There are many steel cases involving such action.
In this context, the tariff isnt protectionism, but a valid response to a specific case of unfair trade, as allowed by the rules. But an across the board tariff on all steel and aluminum imports appears more of a general protectionist tool. Furthermore, given imports of steel are already heavily restricted from China which would be the main target of any such measure given it has long been blamed for overcapacity in the sector youve got to ask whats the point of this broad tariff if it is supposed to be about trade enforcement.