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Info Service on WTO and Trade Issues (Feb25/05) Geneva, 12 Feb (D. Ravi Kanth) — United States President Donald Trump on 10 February announced another round of unilateral tariff hikes to the tune of 25% on steel and aluminum imports from all countries “without exceptions or exemptions”, in an apparent attempt to dismantle the existing regime of binding tariffs that countries had committed to at the end of the Uruguay Round of trade negotiations. Announcing the new round of unilateral tariffs at the White House, President Trump told reporters, “Today, I’m simplifying our tariffs on steel and aluminum. It’s 25% without exceptions or exemptions.” The latest move seems to signal that the Trump administration is ready to set aside the current multilateral trade commitments to achieve the goals set out in his “America First Trade Policy”, which was first announced on 20 January. During his first term in office in 2018, President Trump imposed tariffs of 25% on steel and 10% on aluminum on all countries under Section 232 of the Trade Expansion Act of 1962 concerning national security, which were found to be WTO-illegal in December 2022. Subsequently, the US appealed the panel ruling before the WTO’s dysfunctional Appellate Body, arguing that they are not safeguard measures under Article XIX of the GATT 1994 but security measures under Article XXI. With the US having paralyzed the Appellate Body in December 2019, Washington has now found a convenient option to challenge panel rulings, knowing full well that they will not see the light of day, said analysts. Nevertheless, the Biden administration continued with the steel and aluminum tariffs in 2021 while settling for fresh agreements with the European Union, the United Kingdom, Japan, and several other countries by allowing them to export a certain quantity (export quotas) of their steel and aluminum to the US without duties. President Trump’s latest executive order of a 25% hike in tariffs on all steel and aluminum imports appears to send a chilling message that the Trump administration is willing to wreck all the past multilateral trade agreements to satisfy its domestic constituents, somewhat akin to what it recently did in withdrawing from the Paris Agreement on climate change and the World Health Organization. The new tariffs on steel and aluminum imports are slated to come into effect on 4 March and it remains to be seen whether countries will seek a reprieve from the Trump administration. The US officials justified the tariffs on grounds that they were a response to “surging imports” from foreign exporters, which are “undermining US producers of steel and aluminum,” according to a report in the Financial Times (FT) on 11 February. “This is a big deal … making America rich again,” said Trump as he signed off on the tariff order on 10 February. “The steel and aluminium tariffs 2.0 will put an end to foreign dumping, boost domestic production, and secure our steel and aluminium industries as the backbone and pillar industries of America’s economic and national security,” Peter Navarro, Trump’s top trade advisor, told reporters. The US officials said that the exemptions granted by the previous Biden administration will be nullified, and President Trump would eliminate the loophole concerning the product exclusion process, according to the FT report. “We had a product exclusion process that got completely out of control in the Biden years and there have been literally hundreds of thousands of exclusions approved, and millions of metric tons of steel and aluminium as a result have not been properly tariffed,” said a White House official, according to the FT report. Significantly, US steel trade unions have welcomed the new executive order on steel and aluminum, arguing that the “steel industry in America faces serious threats from foreign actors that seek to destroy domestic production.” Last week, President Trump claimed somewhat unabashedly that the additional tariffs could raise “trillions” of dollars for the US economy, saying that “tariffs are very powerful, both economically and in getting everything else you want.” It appears that the EU is likely to retaliate against the Trump administration’s new executive order, while an official of Canada’s Chamber of Commerce said that the latest order suggests that “perpetual uncertainty is here to stay.” Coming close on the heels of a 10% tariff hike on all goods from China and a proposed move to impose a 25% tariff on goods from Canada and Mexico, the latest executive order by President Trump signals a ratcheting up of pressure on countries either to enter into negotiations or face more tariffs in the coming days, said analysts. It is well known that Canada, Brazil, and Mexico are the top exporters of steel products. Therefore, it is likely a test for these countries as to whether they will retaliate or settle for negotiations. With President Luiz Inacio Lula da Silva in power in Brazil, it remains to be seen how he would respond to these latest tariff hikes by the US, unlike the previous right-wing administration of President Jair Bolsonaro, which removed several alleged trade barriers on American goods. Back in 2019, Australia, South Korea, Japan, Canada, and Brazil had removed trade restrictions on several American exports. However, the latest tariff hike may have only a minimal effect on steel and aluminium exports from China, as these are already blocked by a spate of anti-dumping and countervailing duties. President Trump also reiterated on 10 February that he would go ahead to institute “reciprocal tariffs” under which the US will likely force countries to bring down their tariffs to the current US tariff level of a little over 3%. In short, President Trump appears to be setting the ground for turmoil in the international trading system, forcing countries to either retaliate or bear the pain of increased tariffs with little opposition, said analysts. +
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