On steel and aluminum trade, Trumpism still rules
On Fareed Zakaria’s CNN Sunday show, U.S. national security adviser Jake Sullivan recently touted “profound” differences between the administrations of President Biden and former President Trump. On some issues, Sullivan has a case to make — but not on extending the bogus national security rationale for imposing steel and aluminum import restrictions on U.S. allies.
To recount, in 2018, the Trump administration, in a flagrant misuse of legal statutes, placed steel and aluminum tariffs — 25 percent and 10 percent, respectively — on imports from a number of U.S. allies and trading partners, invoking the national security exceptions in Section 232 of the 1962 Trade Expansion Act. In response, the European Union (EU) levied 25 percent tariffs on a number of U.S. products — and planned to increase these taxes substantially on Dec. 1.
Though strongly critical of Donald Trump’s trade policies, the Biden administration has chosen to “maintain but modify” the Section 232 tariffs. U.S. Trade Representative Katherine Tai has stoutly defended tariffs as a legitimate trade policy tool, while also stating that tariffs can provide the United States with negotiating leverage. She also has defended the use of the “unfair trade practices” provision, Section 301 of the 1974 U.S. Trade Act, as a legitimate tool for unilateral retaliation against such practices — namely $370 billion worth of tariffs on Chinese goods.
Both the Biden administration and EU leaders have sought to ensure closer ties following Trump’s destructive alliance moves. From the outset, the EU focused particularly on the steel and aluminum tariffs, but the Biden administration has resisted forgoing both the Section 232 security rationale and the domestic cushion afforded by the sectoral import taxes.
After months of delay, the final compromise — long opposed by the EU — is a system of so-called tariff rate quotas. Under the agreement, European steel and aluminum companies would be able to export a limited quantity of steel and aluminum untaxed (3.3 metric tons for steel), but above the established quotas, the 25 percent tariffs would kick in. It should be noted that both the steel and aluminum quotas are substantially below the average amounts the EU exported to the United States in the years before the coronavirus pandemic.
More significantly, given the recent passage of infrastructure legislation in Congress, demand for steel and aluminum is expected to rise steeply, deepening the anticipated economic impact of missed export opportunities for EU companies. The United States’s Hobbesian choice is now causing other nations — including Japan, South Korea and the United Kingdom — that were damaged by the Section 232 tariffs to petition the Biden administration for quota relief.
Sullivan and other Biden officials have tried to deflect criticism by pointing to plans to tie future steel and aluminum negotiations and relief from Section 232 tariffs to improved carbon footprints from the production process. It thus will further extend the false national security rationale to purported climate change reform.
When combined with the new U.S. push for China to complete Trump’s so-called “Phase One” trade agreement — in which the Chinese state overtakes the market and dictates agriculture and other imports from the United States, rather than acting as a true trading partner — one can understand why many trade scholars are warning of a potential “new era for managed trade.”
Adam Smith, hide your eyes.
Claude Barfield is a senior fellow at the American Enterprise Institute whose research areas include international trade, trade policy, cybersecurity and digital privacy. A former consultant to the office of the US Trade Representative, his books include “Swap: How Trade Works” with Philip Levy.