On 1 March, US President Donald Trump announced that he will impose tariffs on steel and aluminium imports to protect domestic producers. This decision follows the U.S. Commerce Department’s report last month which concluded that imports of both aluminium and steel are a national security threat.
The US, by imposing trade restrictions, would potentially violate obligations that they agreed to as a World Trade Organisation (WTO) member. The legality of the new trade restrictions relies on the obscure ‘Section 232’ of the ‘Trade Expansion Act of 1962’ which makes allowances for reasons of national defence and has not been used to restrict imports on input materials for over 30 years.
Simon Lester, expert in WTO law, argues: “If the U.S. can impose these tariffs on steel and aluminum on the basis of ‘national security,’ someone else is sure to try for tariffs on food, or clothing, or various other products on the same basis.” Flouting WTO rules with such a loophole could deal a significant and detrimental blow to global free trade.
Trump’s decision to impose steel and aluminium tariffs at a rate of 25 percent and 10 percent respectively would heavily impact close allies Canada, South Korea, and the EU. However, since then Trump has clarified he is open to exempt Canada and Mexico as part of the NAFTA renegotiations, stating: “We have to protect & build our Steel and Aluminium Industries while at the same time showing great flexibility and cooperation toward those that are real friends and treat us fairly on both trade and the military.”
He suggested other close allies could be exempt as he does not consider imports of their steel or aluminium to be a threat to national security. This follows EU threats to impose retaliatory tariffs on a 2.8bn list of over 100 US products. China has also suggested that it would retaliate with an “appropriate and necessary response,” but according to China’s Foreign Minister, China and the US should strive to be partners rather than rivals.
The consequences of the US tariffs are complex. While most steel producers in the US will benefit from US protectionism which in turn will save jobs, some steel manufacturers will suffer, such as those that import steel to refine it before selling it on to other manufacturers (e.g. car or aeroplane manufacturers). This will put increasing pressure on those manufacturers and the consumers who buy their goods.
While Trump claimed “trade wars are good, and easy to win” many economists disagree and a Quinnipiac University poll said close to two-thirds of the US disagree too.