It's time to end the US steel and aluminum tariffs

It's time to end the US steel and aluminum tariffs
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In an interview with Bloomberg last week, Sec. of Commerce Gina RaimondoGina RaimondoCommerce Department announces first round of awards for American Rescue Plan programs Hillicon Valley — Presented by Xerox — US cracks down on tools for foreign hacking Commerce Department cracks down on sale of hacking products to foreign governments MORE said that U.S. steel and aluminum tariffs had done the trick. Folks were back to work, and producers had increased output. What about the threat that Europe will increase its retaliation by year’s end if the Biden administration doesn’t end the tariffs? Raimondo said the U.S. is willing to deal but that “to simply say ‘no tariffs’ is not the solution.” Actually, it is.    

Raimondo’s statement is the stuff of negotiations. After all, the U.S. isn’t going to start its talks with the European Union (EU) by unilaterally disarming. Her answer is worrying, however, because it suggests that the Biden administration underestimates the problem. It’s not just that the tariffs are doing more economic harm than good. Raimondo is wrong about this. It’s that these tariffs are far more costly than most precisely because they’re about national security.

Had Trump simply used a “safeguard” instead of Section 232, these steel and aluminum tariffs would never have made headlines. Sure, the EU and other countries would have sued the U.S. at the World Trade Organization (WTO), but this too would have inspired talks about curbing global excess capacity, which is probably all that the U.S. is going to get from these tariffs.

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But Trump didn’t use a safeguard. He trotted out Section 232, offered a tongue-in-cheek definition of national security, and compromised U.S. exports by showing other countries how to get around their WTO obligations on tariffs. The tariffs aren’t leverage, they’re a liability of epic proportions.

No one thought Biden would end the tariffs overnight. But make no mistake, there is no time to waste in digging out from this mess. And “no tariffs” is exactly the right place to start, by which I mean end the Section 232 steel and aluminum tariffs.

A few safeguard filings could help provide political cover for what will otherwise be spun as unilateral disarmament. In this sense, and this sense only, Raimondo is right: “No tariffs” shouldn’t mean no trade remedies. But this is about politics, not economics.

In claiming that the steel and aluminum tariffs are “very effective,” Raimondo talks a lot about China. But it is Brussels, not Beijing, that is threatening more retaliation if the U.S. doesn’t end these tariffs. Moreover, Section 232 isn’t about competitiveness. If U.S. trade partners (our allies) aren’t playing by the rules in steel and aluminum, the U.S. can level the playing field with a safeguard, and companies can file for antidumping and (or) countervailing duties.

Why didn’t Trump do this? He probably saw Section 232 as protectionism on the cheap. Unlike a safeguard, it doesn’t require the U.S. to compensate those countries hit. But this was a mistake. Section 232 is going to cost the U.S. dearly for years to come.

In the short run, the main casualty will be trade promotion authority (TPA). Trump’s use of Section 232 bothered many in Congress concerned about delegating to the executive. TPA is vulnerable. It gives the president the ability to negotiate trade deals and bring them for a strict up-or-down congressional vote on a set clock. If Congress saddles TPA with more checks, it will undercut U.S. credibility abroad. TPA isn’t magic, but after four years of Trump’s trade chaos, TPA is the single best way to signal to other nations that the U.S. is open for business.

In the long run, seeking protectionism under the banner of national security will erode confidence in the rules-based global economy. Trump didn’t write Section 232, but he made it almost routine. From autos to titanium sponge and mobile cranes, each investigation was less provocative than the one before it. This will come back to haunt U.S. efforts to secure essential supply chains with allies that were caught up in these Section 232 investigations.

More worrisome still, the logic is catching on with other countries. At a WTO meeting on cybersecurity, for example, China invoked national security to defend its measures on imported goods and services that frustrate the U.S., EU, Australia, Canada and Japan. Ironically, China says that U.S. steel and aluminum tariffs, and Trump’s threat to slap them on autos, are proof positive that things are out of control, and wants the national security exception prioritized in reforming the WTO. Funny enough, this was the U.S.’s concern when it took the lead in drafting the original text of the exception after World War II. 

All of which is to say that it’s time to end the U.S. steel and aluminum tariffs.

Marc L. Busch is the Karl F. Landegger Professor of International Business Diplomacy at the Walsh School of Foreign Service at Georgetown University. Follow him on Twitter @marclbusch.