After the Trump government announced imposition of steep tariffs of 25% and 10% respectively on steel and aluminium imports in Mar’18, six of its trade allies, South Korea, Argentina, Brazil, Canada, Mexico and EU (European Union) were given temporary relief from the same for a month or two giving some space to those countries as they sought to negotiate permanent exemptions.
While South Korea, Brazil, and Argentina were given a temporary exemption till 1 May’18; EU, Mexico and Canada were given a provisional relief till 1 Jun’18 to have their negotiations.
Now with the start of June, the overall picture has become much clear with the U.S. government ending the temporary exemptions for all the countries.
The three countries South Korea, Brazil and Argentina are imposed with quotas allowing only a fixed quantity of steel in to U.S. whereas the other three, EU, Mexico and Canada have been given no exemption and are levied with 25% duties on steel exports to U.S. similar to what is imposed on rest on the nations.
Let us see how much quota has been imposed by U.S. on steel imports from selected three countries and how remaining three nations have reacted to White House’s harsh policies.
South Korea:
South Korea is the third-largest steel exporter to the United States and the world’s top importer of Chinese steel. After the tariffs announcement, U.S. and South Korea revised their free trade agreement KORUS under which South Korea is forced to cut its steel exports to the U.S. by 30% of past three years’ average, in exchange for becoming the first U.S. ally to receive an indefinite exemption on steel tariffs imposed by Trump.
The country has received a quota of about 2.68 MnT of steel exports which is 70% of the annual average of Korean steel exports to the U.S. between 2015-2017. Any quantity exceeding this quota will be imposed with harsh tariffs of 25%.
Brazil:
Brazil is U.S.’s second largest steel exporter and in 2017 the country exported about 4.7 MnT of steel to U.S. The Brazilian Ministry of Industry, Foreign Trade and Services has also confirmed the imposition of a quotas system for steel exports to the U.S. in an effort to avoid 25% import tariffs under Section 232.
The country has agreed to limit its steel exports to 70% of the 2015-17 average for finished steel products and 100% of the three-year average for semi-finished steel products. This means that Brazilian companies will be able to annually export 3.50 MnT of finished steel and around 687,000 tonnes of semi-finished steel to the U.S.
Argentina:
Although Argentina is not a major steel exporter of U.S., the country is not exempted and is faced with quota on steel exports if any to U.S. The country has agreed to limit its exports of steel products to the U.S. to 180,000 tonnes per year, based on the average of steel exports during the past three years plus an additional 35%. The additional 35% was defined because Argentina’s steel exports to U.S. in 2015 and 2016 were too low.
Although the quotas are not split by products, Argentina has been exporting mostly seamless tubes to the U.S and according to the customs data, in 2017, Argentina exported around 200,000 tonnes of seamless tubes to the country.
European Union:
As EU is not exempted from the tariffs and is faced with levies of 25% on steel exports to U.S., the 28-nations bloc plans to slap tariffs of 25% on roughly 200 American products, including orange juice, as soon as June 20. US denim, bourbon, motorcycles, peanut butter, motor boats and cigarettes are also in the firing line.
According to the market reports, The American exports targeted in the initial wave of EU retaliatory tariffs are worth roughly Euros 2.8 billion (USD 3.3 billion) annually. Also a second batch of American exports worth around Euros 3.7 billion (USD 4.3 billion) a year could be eventually targeted. This list includes roughly 160 products such as U.S. sunbeds, paper towels, corduroy pants and porcelain tableware that could face EU tariffs between 10% to 50%.
Canada:
Canada accounts for largest share in U.S. total steel imports and in 2017 the country exported about 5.8 MnT of steel to the U.S. Thus, Canada is also faced with 25% tariffs on steel exports to U.S.
In response to these levies, the country has announced its decision to place tariffs on up to 16 billion Canadian dollars (USD 12.4 billion) worth of American goods, including steel and aluminium which is at par with the value of Canadian steel and aluminum exports to the United States.
Mexico:
Mexico is also one of the key steel exporters to U.S. In 2017, the country exported about 3.2 MnT of steel and is subsequently faced with 25% tariffs on its exports to U.S..
In retaliation, Mexico has imposed 15%-25% tariffs on imported U.S. steel and 20% tariffs on some US agricultural products. The tariffs on U.S. steel will cover sheet, plate, pipe, bar and rods. The agricultural tariffs are on U.S. pork legs and shoulders, apples and potatoes. A 25% tariff was also imposed on U.S. cheese and bourbon.
Along with these six countries, Trump government’s decision to impose harsh tariffs on steel imports from the remaining nations of the world have irked almost every country including China which is world’s one of the largest economies. Amid this attack and counter-attack of retaliatory tariffs, the world is on the brink of trade war.
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