The recent announcement by the White House that it intends to unilaterally impose 25 percent tariffs on steel imports and 10 percent tariffs on aluminum imports from all countries except Canada and Mexico has created significant uncertainty among foreign exporters.
It is of great import that Canada and Mexico are excluded from the imposition of section 232 duties for the time being. The European Union, Australia and South Korea have expressed a desire for similar exclusions to be applied to them. In fact, the EU and Australia are almost assured of an exemption based upon press reports. But where does that leave other important allies such as Turkey, India, Brazil and a host of other steel-exporting nations?
Exclusions and exemptions for key allies are possible through strategic bilateral negotiations with the United States, as long as the resulting trade relationships do not negatively impact the U.S. steel and aluminum industries. Countries will be removed from coverage of the Section 232 duties if “a satisfactory alternative means to address the threat to the national security” can be negotiated with them.
One caveat: Any exclusions are considered to be provisional and can be withdrawn should there be a disagreement between the United States and its trading partner.
In short, to play the game, each country has to have a seat at the table. Those countries that sit back and wait for others to start the negotiation process for potential exclusions and exemptions will likely be left waiting, while those who negotiated exclusions enjoy continued market access.
Other viable options for foreign exporters and U.S. importers include:
- Export further processed goods to the United States that do not fall within the specified Harmonized Trade Schedule (HTS) numbers for steel and aluminum as articulated in the Section 232 proclamations.
- Set up processing facilities and/or manufacturing facilities in the United States that will not only open up access to the U.S. domestic market but also potentially be a steppingstone for increased access to Canada and Mexico.
- Encourage trading partners to start negotiation for country exclusions based on specific national security considerations.
- U.S. importers should prepare to request exclusions for supply considerations and a lack of U.S. production capacity of comparable products.