On March 1, President Trump abruptly announced his decision to impose tariffs on steel and aluminum imports pursuant to Section 232 of the Trade Expansion Act of 1962. The day started with conflicting news reports as to whether the president would announce his decision to impose tariffs, followed by the spontaneous announcement by President Trump during a White House meeting with key U.S. steel and aluminum executives.

According to those in attendance, the president announced that the U.S. will impose a 25 percent tariff on all imported steel and a 10 percent tariff on all imported aluminum for an “unlimited period” of time. The president did not specify any country exemptions, nor did he discuss the process to exclude products from the scope.

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President Trump announced plans to approve tariffs on both steel and aluminum products pursuant to Section 232 of the Trade Expansion Act of 1962. According to his meeting earlier today with top steel and aluminum executives, the U.S. will impose a 25 percent tariff on steel imports and a 10 percent tariff on aluminum for a “long period” amount of time. 

The President has yet to specify any country exemptions, nor did he discuss the process to exclude certain products from the scope. The official announcement is expected to be formally signed and released next week.


On February 16, U.S. Secretary of Commerce Wilbur Ross released the findings of the Department of Commerce (Commerce) investigations on the effects of steel and aluminum imports on U.S. national security pursuant to Section 232 of the Trade Expansion Act of 1962.

Commerce concluded the present quantities of steel imports are “weakening [the U.S.] internal economy” and threaten to impact the national security of the United States. The same was said of aluminum imports, with the report noting that “recent import trends have left the U.S. almost totally reliant on foreign producers of primary aluminum … that is essential for key military and commercial systems.”

Steel Remedies

In terms of specific remedies, Commerce recommends the President adjust the level of steel imports through quotas and/or tariffs imposed on a broad range of all major categories of steel currently produced in the United States. The relief is intended to ensure that U.S. domestic steel producers maintain a capacity utilization rate of 80 percent or better. The report does not mention the duration of any proposed remedies.

Commerce presented two recommendations:

  • A global quota of 63 percent or global tariff of 24 percent on imports from all countries.
    • Commerce proposes that under this option the President could exempt specific countries by granting them a quota of 100 percent of their 2017 import volumes. Such exemption would be based on an overriding U.S. economic or security interest.
  • A higher overall tariff of 53 percent, but only on a subset of countries (Brazil, South Korea, Russia, Turkey, India, Vietnam, China, Thailand, South Africa, Egypt, Malaysia, and Costa Rica

Under either alternative, quotas and/or tariffs would be imposed on imports of all steel products that fall into one of the following five broad product categories:

Carbon and alloy flat products produced by rolling semi-finished steel through varying sets of rolls, including sheets, strips, and plates;
Carbon and alloy long products that fall outside the flat products category, including bars, rails, rods, and beams;
Carbon and alloy pipe and tube products either seamless or welded pipes and tubes, some of which may include stainless and alloys other than stainless;
Carbon and alloy semi-finished products consisting of initial, intermediate solid forms of molten steel, to be re-heated and further forged, rolled, shaped, or otherwise worked into finished steel products, including blooms, billets, slabs, ingots, and steel for castings; and
Stainless steel products in flat-rolled, long, pipe and tube, and semi-finished forms, containing at minimum 10.5 percent chromium and, by weight, 1.2 percent or less of carbon, offering better corrosion resistance than other steel.

Steel Exclusions

The Secretary also proposes a separate exclusion process through which affected U.S. parties may seek exclusions from the quota or tariff for specific products based on the following: (1) lack of sufficient U.S. production capacity of comparable products; or (2) specific national security-based considerations. Commerce will lead the exclusion appeal process, providing for public comment on exclusion requests and decisions within 90 days of the requests’ filing. Commerce will also consider whether the quota or tariff for remaining products must be adjusted to ensure the domestic industry achieves projected production levels.

Aluminum Remedies

The Secretary determined it necessary to reduce imports to a level that will allow the domestic industry to restart idled capacity of primary aluminum in order to remove the threat of impairment. The Secretary recommends the President impose quotas and/or tariffs on a wide range of aluminum products to ensure that U.S. aluminum producers operate profitably and maintain an average capacity utilization rate of 80 percent. The remedies’ duration is fairly open-ended, as the Secretary recommends that the action taken remain in effect long enough to “stabilize the U.S. industry” by building cash flow to reduce debt and raising capital for plant modernization. (The report mentions that it can take up to nine months to restart idled smelting capacity.)

Commerce presented two recommendations:

  • A global quota of 86.7 percent or global tariff of 7.7 percent on imports from all countries.
  • A higher overall tariff of 23.6 percent, but only on a subset of countries (China, Hong Kong, Russia, Venezuela, and Vietnam).

Under either alternative, quotas and/or tariffs would be imposed on imports of:

Unwrought aluminum (HTS code 7601)
Aluminum castings and forgings (HTS codes 7616.99.5160 and 7616.99.5170)
Aluminum plate, sheet, strip, and foil (HTS codes 7606 and 7607)
Aluminum wire (HTS code 7605)
Aluminum bars, rods and profiles (HTS code 7604)
Aluminum tubes and prices (HTS code 7608)
Aluminum tube and pipe fittings (HTS code 7609)

Aluminum Exemptions/Exclusions

Importantly, Commerce further proposes that under either alternative the President could exempt specific countries either entirely or by granting them a quota of 100 percent of their 2017 import volumes. Such exemption would be based on an overriding U.S. economic or security interest, including the exempted countries’ willingness to help address “global excess capacity and other challenges facing the U.S. aluminum industry.” (Any exemption would require a corresponding adjustment to the final quota or tariff imposed on the other countries.)

The Secretary also proposes a separate exclusion process through which affected U.S. parties may seek exclusions from the quota or tariff for specific products based on the following: (1) lack of sufficient U.S. production capacity of comparable products; or (2) specific national security-based considerations. Commerce will lead the exclusion appeal process, providing for public comment on exclusion requests and decisions within 90 days of the requests’ filing. Commerce will also consider whether the quota or tariff for remaining products must be adjusted to ensure the domestic industry achieves projected production levels.

Deadline for President Trump

President Trump has until April 11, 2018 to determine whether he agrees with the Secretary’s recommendations on steel, and until April 20, 2018 on aluminum.

On January 22nd, President Trump imposed new “safeguard” tariffs on imported solar panels and washing machines, which will be in place for the next three years before tapering downward.  For the renewable energy industry, this is another major blow from this administration. Solar panels, most of which currently come from China will have an additional tariff rate of 30% imposed. Notably, there are already more than 150 other U.S. trade measures in place against various Chinese products. This new measure threatens to handicap a $28 billion industry that relies on parts made abroad for 80 percent of its supply chain.

Trump has also imposed a tariff of 20% on imported washing machines.  This is the first use of safeguard tariffs by the United States since 2002 when President Bush used them to restrict steel imports.  This decision comes on the heels of a determination by the International Trade Commission (ITC) that imports of these goods had injured domestic producers.

While many have seen the action as a necessary means of protecting American manufacturers, members of the South Korean government have harshly criticized the move and signaled a willingness to formally air their grievances before the World Trade Organization (WTO).  Significantly, the 2002 safeguard tariffs imposed by the Bush Administration were ultimately withdrawn after an adverse ruling at the WTO put the United States under the threat of retaliation.

On December 20, 2017, the Bureau of Industry and Security (BIS) added two Russian companies to  its Entity List because they provided technology which aided the development of a new Russian cruise missile—the nuclear-capable Novator 9M729 missile (designated by NATO as the SSC-8)—which the U.S. alleges is a violation of the 1987 Intermediate Nuclear Forces Treaty (INF).

BIS’s action is part of the new Trump Administration INF Treaty Integrated Strategy. It states, “While the United States will continue to pursue a diplomatic solution, we are now pursuing economic and military measures intended to induce the Russian Federation to return to compliance.” In addition to the first BIS designations related to alleged INF treaty violations, the U.S. is beginning research and development on its own new nuclear cruise missile, an action that Russia is alleging represents a separate violation of the INF Treaty.

The two designated parties are: (1) Joint Stock Company Experimental Design Bureau Novator; and (2) Joint Stock Company Federal Scientific and Production Center Titan-Barrikady.

NAFTA negotiators at the working level met intersessionally from December 9-15 in Washington D.C., conducting technical discussions on digital trade, financial services, customs, energy, state-owned enterprises, and textiles, among other chapters.

No chapters were closed during the latest meeting. Negotiators also mostly avoided addressing in detail the most controversial proposals tabled by the United States at the fourth round of negotiations last October (i.e., rules of origin for automobiles, dispute settlement, the “sunset clause,” or procurement). These will likely be discussed at the next formal round on January 23-28.

Please click here for more information on the negotiations.

On December 20, 2017, the Court of Justice of the European Union (CJEU) decided that a company may not use transaction value for customs valuation purposes when a transfer price consisted of both an amount initially invoiced and declared, and a flat-rate adjustment made after the end of the accounting period.

The Community Customs Code (CCC) and its related jurisprudence provides that customs value must be determined primarily according to the transaction value method, with the price actually paid or payable for the goods to be adjusted where necessary to avoid establishing an arbitrary or fictitious customs value. The CJEU found that uncertainty regarding future adjustments at the end of the accounting period made it impossible for the transfer price to be used as the transaction value for imports into the EU.

Please click here for more on this decision, as well as a discussion on how the U.S. continues to allow importers to use the transaction value method of appraisement.

The Department of Commerce submitted its report on the impact of steel mill product imports on U.S. national security to President Trump on January 11.

In a statement on its website, the Department announced that the long-awaited results of the investigation, commonly known as the Section 232 Report, will not be made public until after the President makes his final decision. 

Although the president has 90 days to act, he has the discretion to announce his decision early. 


On November 5 – 14, President Trump made his first official visit to Asia, with stops in Japan, South Korea, China, Vietnam, and the Philippines. As part of his tour, President Trump attended international summits including the Asia-Pacific Economic Cooperation (APEC) forum, the Association of Southeast Asian Nations (ASEAN) meeting, and the East Asia Summit (EAS). The two-week trip was one of the longest presidential visits to Asia in recent history. Although deemed “tremendously successful” by the President, media assessments of the trip were more critical, noting that the President came away with no real change in trading partners’ policies or practices.

The president began his trip by meeting with the leaders of Japan and South Korea. Trump reassured Japan’s Prime Minister Shinzo Abe and South Korea’s President Moon Jae-In of the U.S. commitment to their respective countries with regards North Korea, while strengthening trilateral diplomacy between the U.S., Japan, and South Korea in order to apply international pressure on North Korean over its nuclear weapons program. In Japan, the White House touted an MOU between the U.S. Trade and Development Agency (USTDA) and Japan’s Ministry of Economy, Trade, and Industry, who will collaborate on public procurement best practices to promote “quality infrastructure” development in emerging economies throughout Southeast Asia. While the agreement ostensibly deepens the U.S.-Japan economic ties, it is also squarely aimed at countering the influence of China’s “One Belt, One Road” initiative and is part of the broader Indo-Pacific strategy that is emerging as the Trump administration’s foreign policy framework for the region.

President Trump then visited China where he was accompanied by a business delegation of 29 corporate executives to unveil investment deals potentially worth $250 billion. Industry expressed concern that the administration was more focused on this figure than on substantive policies that pose challenges for U.S. companies. After the President’s visit, China unilaterally announced that it would take steps in accordance with their own timeline to reform its financial sector, including raising foreign ownership limits in joint-ventured involved in the futures, securities and funds markets. Industry remains cautious with the announcement, and is looking forward to seeing the details in the draft rules.

President Trump continued his tour by addressing the APEC CEO Summit in Da Nang, Vietnam on November 10. Almost half of the APEC member economies are still in talks to push forward the Trans Pacific Partnership (TPP) and were in discussions on the sidelines of the APEC meetings, from which the U.S. was notably absent. Trump’s speech in Da Nang focused on the administration’s Indo-Pacific strategy, noting that the United States will make “bilateral trade deals with any Indo-Pacific nation that abides by the principles of fair and reciprocal trade.” President Xi had the final word at the APEC CEO Summit, a slot traditionally held by the U.S. President. President Xi laid out China’s vision for the region, reiterating many of the themes he focused on at the recent 19th National Party Congress, which included innovation, higher quality of growth, and the “One Belt, One Road” initiative to support regional infrastructure development. In Vietnam, President Trump also unveiled $12 billion in commercial deals, including the purchase of U.S. aircraft and MOUs on LNG and transportation.

On the final leg of his trip, President Trump met with Philippine President Rodrigo Duterte and nine leaders of the Association of Southeast Asian Nations (ASEAN). Security concerns regarding the North Korean threat were central to their discussions.

For more information, contact: Robert Holleyman, Tracy Huang, Cherie Walterman

The first full month with the White House’s trade team in place saw a ramp up of activity initiated in the early days of the administration. To a great extent, the administration is still in the driver’s seat; its decision to renegotiate NAFTA, its self-initiated actions on the national security reviews of steel and aluminum imports, and the review of trade deficits are all areas where the president is pursuing a shift in direction of policy.

What is becoming apparent is the administration is facing the challenge of balancing its priorities with the legacy of continuing negotiations and expiring agreements it inherited, as well as the policy responses of trading partners to its moves. How it balances these sometimes competing prerogatives will become clearer in the coming months.

NAFTA and China

In wide ranging testimony before the House Ways and Means and Senate Finance Committees on June 21-22, U.S. Trade Representative Robert Lighthizer characterized the administration’s trade policies as discrete actions; however, when taken together, the measures demonstrate a results-driven use of trade policy.

Regarding NAFTA renegotiation, Lighthizer faced questions about strategy and specific priorities for the negotiations. His key messages were:

  • There is “no artificial deadline” for NAFTA renegotiation; the priority is getting a high-standard agreement.
  • NAFTA is recognized as deficient on intellectual property, but the three countries’ systems are not incompatible, and “our hope is that we end up with a model agreement in this area.” Securing extensions of newer IP protections, including pharmaceuticals, to NAFTA will be a priority in the coming negotiations.
  • Currency manipulation is not considered a problem with Canada or Mexico, but the renegotiation is an opportunity to put together a “model” agreement with an eye to future negotiations with other countries.
  • NAFTA labor provisions should be strengthened, and any new principles should build on the NAFTA labor annex and not take a step back by narrowing the scope of existing principles.
  • Lighthizer would do “all I can” to address remaining agricultural barriers to American exports to Mexico and improving dairy access to Canada.
  • On the future of investor-state dispute settlement, he said “I can’t say we will get rid of ISDS, but we will see what we can do to perhaps rebalance where we are in this situation.”

Unsurprisingly, the committees were very interested in White House strategy on China. Of note, Lighthizer addressed:

  • WTO Market Economy Status: Lighthizer considers China’s seeking market economy status at the WTO the “most serious litigation matter we have at the WTO right now… China is certainly not a market economy under our laws.” Lighthizer is not sure what will happen with the WTO ruling, but if the WTO rules that China can attain market economy status, this would be “cataclysmic”.
  • Outcomes from the 100 day plan: USTR is working on remaining issues surrounding science-based approval of American agriculture biotech products in China. Lighthizer is confident these issues can be resolved. For example, U.S. beef access to China “has been restored.”
  • Technology: USTR will continue to focus on the issue of opening China to U.S. cloud services. He said, “China has had an unfair advantage in several different sectors of the economy.”
  • Mercantilism: Lighthizer used aggressive language regarding China, saying, “I do believe our trade model is better than China’s. We have to take on China when they do something that is inconsistent with how we think the economy should develop and work…We have to prevail against China for the good of the world.”
  • Autos: Lighthizer called the issue of Ford moving its factory activity to China “very troubling”. He said there is no administration position as of yet, but that if this happened for reasons that are “noneconomic”, he thinks the administration should take action.

A Further Round of Engagements – Europe, India, Korea, Japan

The “built-in” agenda of negotiations and agreements the administration inherited attracted more attention in June. Summit diplomacy with India and South Korea and further engagement with Japan and the EU are beginning to clarify next steps with major trading partners.

  • Europe: In early June, Commerce Secretary Ross hinted the administration could still proceed with TTIP negotiations with Europe, while at the same time pursue smaller, sectoral agreements where deals could be struck outside the omnibus agreement framework. In his House testimony, USTR Lighthizer said the White House appreciated the current political reality in Europe. The recently concluded election in France and coming election in Germany suggest the Trump administration will not be able to move quickly on any far-reaching agreement with the EU. President Trump’s participation in the G20 Summit in Hamburg in July is seen as another opportunity to clarify the Administration’s intent regarding TTIP.
  • India: Prime Minister Modi’s first meeting with President Trump yielded an agreement to conduct a “comprehensive review of trade relations with the goal of expediting regulatory processes; ensuring that technology and innovation are appropriately fostered, valued, and protected; and increasing market access in areas such as agriculture, information technology, and manufactured goods and services.” One key objective for Modi’s visit was to maintain a positive tenor of relations with the United States, and the agreement on a trade review neutralized the potential impact of India’s inclusion among the countries highlighted in the trade deficit review report.
  • South Korea: President Trump’s stated dissatisfaction with the terms of the U.S.-Korea Free Trade Agreement (KORUS) loomed over the visit by newly-elected President Moon Jae-in. The official outcome of the two leaders’ engagement on trade was a neutral reference in the Joint Statement issued at the end of their meeting to “work together, as part of the process of the Commercial Dialogue, to promote investment, support entrepreneurs, and facilitate cooperation between the United States and the [Republic of Korea] to boost economic growth and job creation in both countries.” The statement made no reference to KORUS or any commitment to change its terms, but did reference working together on addressing steel overcapacity and “non-tariff barriers to trade”.
  • Japan: The Minister for Economy, Trade and Industry (METI), Hideki Seko, made a low profile visit to Washington to continue the economic dialogue established during Vice President Pence’s visit to Tokyo in April. Following USTR Lighthizer’s meeting with Seko on the margins of the Asia Pacific Economic Cooperation (APEC) Trade Ministers’ meeting in May, it is increasingly clear the economic dialogue is shifting more towards a way to deal with ongoing issues and promote joint action where feasible, rather than moving in the short term towards negotiation of a bilateral free trade agreement. For its part, Japan is playing down the prospect of negotiations, while at the same time working with the remaining ten other members of TPP to revise and complete that agreement.

232 Investigations, Deficit Reports a Signal of Things to Come

By the end of June both the Department of Commerce report on significant trade deficits and the Section 232 reports on steel and aluminum had been submitted to the White House. Of the two, the 232 reports are seen as having a more immediate potential impact because its findings (not yet public) could recommend specific remedies on steel and aluminum imports and (per USTR Lighthizer’s testimony) could cause affected trading partners to threaten retaliation.

Over the longer term, the trade deficit report could have broader impact depending on its specific recommendations. If it attributes deficits, or some component of structural deficits, to trade restrictive policies, the administration may use the finding as a pretext to launch negotiations or unilateral actions with trading partners to address imbalances.

For more information, contact: Paul Davies