After the Trump government imposed import tariffs of 25% and 10% on steel and aluminum respectively in the first week of March 2018, it has created a substantial outrage among majority of its trade allies.
In response to these tariffs, China is the first country to file a complaint with WTO (World Trade Organisation) challenging U.S. government’s decision of tariff hike on imported steel and aluminum. According to WTO, China has requested 60 days of consultations* with the U.S. on the steel and aluminum dispute and if this failed country’s next step could be to request a ruling (final decision) from a panel of trade experts. China has claimed that the Trump’s decision to impose additional tariffs on steel and aluminum is the violation of international trade rules.
Although China’s percentage share in U.S. total steel imports is quite limited following earlier tariff hikes imposed by the U.S. government (as a measure to protect its domestic steel industry from China’s cheaper exports), trade economists believe that Beijing took the matter to WTO in order to show that it would defend itself.
According to the reports, the Chinese government has issued a USD 3 billion list of U.S. goods including pork, apples and steel pipes on March 23 that it said might be targeted for retaliation if Trump fails to negotiate a settlement to the dispute over steel and aluminium charges.
EU (European Union):
Following China, EU on this Monday (16 Apr’18) also filed a complaint with WTO over U.S tariffs. In a statement published on WTO’s website, EU said that “Having a substantial interest as an exporter in this case, the European Union requests consultations with the United States” to agree “safeguards”, which means that EU wants to exchange views and seek clarification from U.S. regarding the proposed measures and to reach an understanding on ways to achieve protection as per the WTO’s ‘Agreement on Safeguards**’.
As per the market reports, the discussions between EU and U.S. are going on and that the EU is insisting on getting a full and unconditional exemption from the harsh U.S. tariffs announced.
India:
Now, after China and EU, India has also moved to WTO seeking compensation from U.S. for trade tariffs imposed as per the documents filed by India to WTO on Tuesday (17 Apr’18). The two points that can be highlighted in this case is that India has not invoked the dispute mechanism settlement route for this consultation and has sought consultation under ‘Agreement of Safeguards’. Under ‘Agreement of Safeguard’ a complainant can seek an explanation from the other party as to why the duties or tariffs have been imposed and can also seek compensation for the damages done to the complainant due to the high duties.
*According to WTO, consultations between the parties are the first stage of formal dispute settlement. They give the parties an opportunity to discuss the matter and to find a satisfactory solution without resorting to any legal action. Only after such mandatory consultations have failed to produce a satisfactory solution within 60 days may the complainant request formal decision by the panel of trade experts.
** Agreement on Safeguards sets forth the rules for the application of safeguard measures which are defined as “emergency” and temporary actions with respect to increased imports of particular products, where such imports have caused or threaten to cause serious injury to the importing country’s domestic industry.
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