Consistent with President Trump's America First trade agenda, his administration imposed tariffs on steel and aluminum imports in early March of 2018, triggering various responses and challenges. Countries have followed through on early objections to the tariffs through retaliatory tariffs and challenges in the World Trade Organization (WTO), and steel importers have challenged the legality of these tariffs under U.S. domestic law. At the same time, these tariffs have been revised multiple times, either to delay the implementation period for certain countries seeking exemptions or to permanently grant exemptions to countries who reached negotiated arrangements with the United States.
On March 8, 2018, the United States imposed a ten percent tariff on imported aluminum,Footnote 1 and a twenty-five percent tariff on imported steel.Footnote 2 These tariffs were imposed pursuant to Section 232 of the Trade Expansion Act of 1962,Footnote 3 which allows the president to adjust imports once “the [Secretary of Commerce] finds that an article is being imported into the United States in such quantities or under such circumstances as to threaten to impair the national security.”Footnote 4 As originally enacted, the tariffs were to go into effect March 23, 2018,Footnote 5 with built-in temporary exemptions for imports from Canada and Mexico.Footnote 6
In addition to initial exemptions for Canada and Mexico, Trump recognized that “[the United States] has important security relationships with some countries whose exports of steel articles to the United States weaken our internal economy and thereby threaten to impair the national security,” and explicitly encouraged any such country to engage in negotiations to find alternatives to the tariffs.Footnote 7 Following the announcement of the tariffs, various U.S. trading partners sought to take advantage of this option.Footnote 8
On March 22, 2018, the day before the tariffs were originally to go into effect, Trump signed Proclamation 9710Footnote 9 and Proclamation 9711,Footnote 10 which amended Proclamations 9704 and 9705. Proclamations 9710 and 9711 granted extensions until May 1, 2018 to Argentina, Australia, Brazil, South Korea, and the European Union (EU),Footnote 11 in addition to the preexisting extensions for Canada and Mexico. These extensions were granted in light of “important security relationships”Footnote 12 and also make reference to shared policy interests unique to these specific states.Footnote 13 For all other countries, the tariffs went into effect on the original date of March 23.Footnote 14 China promptly responded by imposing tariffs on 128 U.S. products worth approximately $3 billion in exports, describing the U.S. tariffs as “safeguard measures … only targeted at a few countries [and that] violated the non-discrimination principle, which is the footstone of [the] multilateral trading system.”Footnote 15
Just before the end of March, South Korea and the United States “agreed on terms for a country exemption for the Republic of Korea from tariffs imposed on steel imports … pursuant to Presidential Proclamation 9705, as amended.”Footnote 16 According to a press release from South Korea's Ministry of Trade, Industry and Energy:
Regarding the steel tariff issue, Trade Minister Kim said that the U.S. agreed to exempt Korea from steel tariffs imposed under Section 232 of the U.S. Trade Expansion Act and that Korea agreed to receive a quota of about 2.68 million tons of steel exports annually. This is equivalent to about 70 percent of the annual average Korean steel exports to the U.S. between 2015 and 2017.Footnote 17
The EU and the other countries that had received extensions continued to negotiate for more permanent solutions. On April 30, 2018, again the day before the tariffs were to go into effect, Trump signed Proclamation 9739Footnote 18 and Proclamation 9740,Footnote 19 once again amending Proclamations 9704 and 9705. Proclamations 9739 and 9740 split the remaining extension receivers, Australia, Argentina, Brazil, Canada, Mexico, and the EU, into two distinct groups.
With regard to the first group, comprised of Australia, Argentina, and Brazil, President Trump found that, while the specific details of deals still had to be worked out, these countries had “agreed in principle … on satisfactory alternate means to address the threatened impairment to our national security.”Footnote 20 The text did not make clear what these “satisfactory alternate means” were, but a corresponding White House press release indicated that the United States was focusing on quotas.Footnote 21 News reports in the following month supported this as to Argentina and, with respect to steel, as to Brazil.Footnote 22 (Australian officials, by contrast, rejected reports that Australia had agreed to quotas, stating that they received a “permanent and unconditional” exemption.Footnote 23) These three countries thus received tariff exemptions without expiration dates, although the proclamations include a provision that “if the satisfactory alternative means are not finalized shortly, [Trump] will consider re-imposing the tariff.”Footnote 24 On May 31, President Trump issued two more proclamations relevant to these countries, with Proclamation 9759 granting permanent exemptions to all three countries with respect to steelFootnote 25 and Proclamation 9758 granting permanent exemptions to Argentina and Australia with respect to aluminum.Footnote 26 These exemptions were given because the “United States has agreed on a range of measures with these countries, including measures to reduce excess [steel/aluminum] production and excess [steel/aluminum] capacity … .”Footnote 27
The remaining countries, Canada, Mexico, and the EU, had not come to any agreement with the United States at the time of the April 30 proclamations. But in light of an asserted need for continuing and productive discussions, Trump elected to reextend the non-enforcement period for all three until June 1, 2018. By the time this date arrived, no deals had been reached with any of the three, and the tariffs accordingly went into effect.Footnote 28 For Canada and Mexico, the negotiations were wrapped up in the ongoing negotiations over the North American Free Trade Agreement (NAFTA).Footnote 29 For its part, the EU was firm in its insistence that it “will not negotiate under threat” and that it should be “fully and permanently exempted from these measures.”Footnote 30 As of June 1, the EU, Mexico, and Canada had all signaled their intent to retaliate: “[t]he EU said it would impose import taxes on politically sensitive items like bourbon from Senate Majority Leader Mitch McConnell's home state … . Mexico said it would levy tariffs on American farm products, while Canada zeroed in on the same metals that Trump had targeted.”Footnote 31
Unsurprisingly, the U.S. tariffs have generated responses within the WTO framework. Already at odds with the United States over other trade issues,Footnote 32 China was the first to act. On April 5, 2018, China filed a request for consultations in the WTO concerning the steel and aluminum tariffs.Footnote 33 The request alleged multiple violations of the General Agreement on Tariffs and Trade (GATT) 1994 and its associated Agreement on Safeguards.Footnote 34 As to GATT 1994, China claimed that the United States had imposed excess duties and was imposing its tariffs selectively.Footnote 35 As to the Agreement on Safeguards, China asserted that the U.S. tariffs were “safeguard measures in substance.”Footnote 36 It considered that the United States neither had an adequate justification for seeking to protect its domestic steel and aluminum industries through safeguards nor had followed the appropriate procedures for implementing safeguard measures.Footnote 37
The United States responded that its tariffs were not safeguards, but rather tariffs that it was entitled to impose in light of GATT Article XXI, a provision which allows members to act for the protection of “essential security interests.”Footnote 38 Accordingly, the United States claimed, its tariffs “are issues of national security not susceptible to review or capable of resolution by WTO dispute settlement,” although it agreed to enter into consultations “[w]ithout prejudice” to this position.Footnote 39 It added that “[b]ecause the tariffs imposed pursuant to Section 232 are not safeguard measures, the United States considers Article 8.2 of the Agreement on Safeguards does not justify China's suspension of concessions or other obligations”—and thus, in the United States’ view, China had no right to respond by targeting U.S. exports.Footnote 40
The EU, along with India, Russia, Thailand, and Hong Kong, have sought to join the China-initiated consultations.Footnote 41 India and the EU have also each submitted their own requests for consultations, as have several other countries including Mexico and Canada.Footnote 42
In addition to proceedings at the international level, at least one case challenging the steel tariffs has been brought in the U.S. Court of International Trade.Footnote 43 The action, brought by a Swiss steel exporter and its U.S. affiliate, alleges that
[t]he imposition of that tariff on the Plaintiff's steel is unconstitutional inasmuch as the Administration's Steel Proclamation was issued purely for political and economic reasons, and therefore exceeded the scope of Congress's delegation of authority to the Executive Branch to impose tariffs to promote and protect national security.Footnote 44
The complaint also alleged a failure to provide fair notice.Footnote 45
Notwithstanding the political and legal responses to the steel and aluminum tariffs, in the future the Trump administration may pursue Section 232 tariffs on other products as well. On May 23, 2018, “following a conversation with President Donald J. Trump, U.S. Secretary of Commerce Wilbur Ross initiated an investigation under Section 232 … [regarding] whether imports of automobiles … and automotive parts into the United States threaten to impair … national security … .”Footnote 46
