United States: 5 keys to understanding the import duty on steel and aluminum announced by Donald Trump

United States: 5 keys to understanding the import duty on steel and aluminum announced by Donald Trump


The president of the United States, Donald Trump, announced on Thursday the imminent imposition of tariffs on steel and aluminum imports.

The measure will be formally approved next week and will presumably affect countries such as Canada and China, which are among the main exporters with access to the US market.

Trump assured that the steel and its derivatives will be taxed with 25%, while for aluminum 10% will be applied. Although White House sources cited by the Reuters agency later claimed that the details are yet to be decided.

The United States imports four times more steel than it exports and buys this merchandise to more than 100 countries.

The president justified his decision on his Twitter account, in which he stated that his country suffers “unfair trade” from its competitors.

“Our steel and aluminum industries (and many others) have been decimated for decades by unfair trade and bad policies with countries around the world, we can not allow them to continue taking advantage of our country or our companies. INTELLIGENT COMMERCE! “, He wrote on Twitter.

The announcement of the new customs tariffs was badly received in the stock market. The Dow Jones index, the main United States, closed its daily session with a 1.7% drop.

However, the value of American steel companies increased remarkably at the same time.

The reaction of the other giant of the global economy, China, which could respond to US tariffs with the imposition of its own, which would lead to a commercial war, the scenario most feared by experts and investors, is feared in the parks .

A steel plant in the Chinese province of Hebei.
Copyright of the REUTERS image
Image caption Many investors fear that the announcement triggers a trade war between the United States and China.

Since becoming president, Trump has repeatedly denounced what he considers China’s abusive competition, whose practices, he assures, harm the US industry and its workers.

It is not yet known if tariffs will be applied to all imports or only to those of some countries, but some traditional US allies, such as Germany or Canada, could also see their products harmed.

1. Why now?

Already in the electoral campaign, the candidate Trump cried out against the foreign powers that “unload enormous amounts of steel in the United States”. “That is killing our steel workers and the steel companies,” he said then.

Messages like these he has already repeated as president. According to him, China’s low-cost exports are damaging the viability of the US industry , which is the world’s largest steel importer.

With the announcement of this Thursday, Trump advances towards the execution of the protectionist policy that he has been pointing out in his speeches. The recent introduction of restrictions on the importation of washing machines was a first step.

But China is not the only country that exports this material to the United States, but one more of the 110 that do it. By volume, the Asian giant ranks 11th on the list. Ahead of it are Canada, Japan or South Korea, all states with close and cordial relations with Washington.

The imposition of tariffs was already suggested by the Secretary of Commerce, Wilbur Ross, in a report prepared at the request of the president. Trump wanted to know “if steel imports threaten to deteriorate national security.”

2. Trump’s message

Trump promised to rebuild the national steel industry, which he believes has been mistreated in recent years by the governments that preceded him and the Chinese competition.

“When our country can not manufacture aluminum and steel, it is as if we did not have much country,” he said.

“We need large producers of steel and aluminum for defense,” he said in full visit to the White House of Liu He, economic adviser and friend of Chinese President Xi Jinping.

An employee in an American steel mill.
Copyright of the GETTY IMAGES image
Image caption The number of workers in the steel industry in the United States was reduced by 50,000 between 2000 and 2016.

The announcement this Thursday was slightly delayed, while circulating information that spoke of disagreements between his team on the measures that were going to make public.

Finally, the president appeared. A dozen executives from large companies in the sector, such as US Steel Corp and Arcelor Mittal, were waiting for him.

3. What was the reaction to the announcement?

  • Canada : The Minister of Foreign Affairs, Chrystia Freedland, said that any tariff “would be absolutely unacceptable”.
  • European Union: “The EU will react firmly and proportionately to defend our interests,” said the president of the European Commission, Jean-Claude Juncker.
  • China : I had already said that I would consider response measures if the US imposed the tariffs.
  • US House of Representatives: A spokesman for Paul Ryan, Speaker of the House, said Ryan hopes that Trump “will consider the unintended consequences of the idea and will study other approaches before moving forward.”

4. What is the situation of the industry of the sector in the United States?

The Federal Department of Energy states that the steel industry is recovering after the collapse that followed the 2008 financial crisis.

But now it is much weaker than it was when the century began. In the year 2000, USA produced 112 million tons of steel, a figure that fell to 86.5 million in 2016.

In 2000, there were 135,000 people employed in the sector. In 2016, 83,600.

Presentational gray line

And now that?

Analysis of Natalie Sherman, correspondent of economy of the BBC in New York.

The threat of the imposition of tariffs on steel and aluminum has hovered around the Donald Trump government for months. The delays in announcing them made the president vulnerable to criticism from those who accuse him of barking a lot and biting a bit, despite his message that he would put “the United States first”.

Now he has silenced that noise and ruled a victory for the steel industry.

But the chaos that has wrapped up Thursday’s announcement, in which his advisers apparently tried to dissuade Trump from the step he took, bypasses how many losers he can leave.

Dozens of companies in industries, from the automotive sector to construction, have warned of the loss of hundreds of thousands of jobs and the increase in costs for steel-dependent manufactures.

The Secretary of Defense, Jim Mattis, said that such a move would cost the country in the support it receives from allies such as Canada and South Korea.

And the European Union, China and Mexico have all said that they weigh to impose also tariffs in retaliation , which would impact sectors like American agriculture, key in the country’s politics.

The last time the United States imposed steel tariffs in 2002, then-President George W. Bush abolished them after two years to avoid the danger of a similarly damaging response from its competitors.

The steelmakers present at his appearance on Thursday told President Trump that they trust his good judgment.

But if, as many analysts predict, the result of this decision is a commercial war, it remains to be seen how many will share that opinion.

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Rava Desk

Rava is an online news portal providing recent news, editorials, opinions and advice on day to day happenings in Pakistan.


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