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Trump’s tariffs strategy seen as US bargaining chip; Ohio senators discuss impact

By Don Lee • Mar 9, 2018 at 11:00 AM

WASHINGTON — President Donald Trump’s final order to slap sweeping tariffs on imported steel and aluminum looks less like an effort to preserve national security and more like an attempt to create a giant bargaining chip that the president can play around the world.

A week after haphazardly announcing across-the-board tariffs on imported metals, Trump on Thursday signed orders that would impose duties of 25 percent on foreign steel and 10 percent on aluminum. The levies take effect in 15 days.

In doing so, the president swept aside a flurry of warnings from ally nations, companies and lawmakers from his own party, who worry Trump’s actions will ignite a dangerous trade war that costs more American jobs than it saves.

The final decrees retreated sharply from the blanket tariffs Trump spoke of just a week ago. He exempted — at least temporarily — Canada and Mexico from the duties, and opened the door for virtually every other country to also avoid them — provided they offer a “satisfactory alternative,” according to the orders.

Exactly what might be acceptable as an alternative wasn’t spelled out and Trump stressed that “we’re going to be very flexible.” His criteria appeared subjective.

“We’re going to see who’s treating us fairly, who’s not treating us fairly,” Trump said. He then invited trading partners who want to avert the new tariffs to make their case to his chief trade official, Robert Lighthizer. Part of the consideration, he said, “is going to be military. Who’s paying the bills, who’s not paying the bills.”

Trump suggested that Canada and Mexico could make their exemption permanent by agreeing to U.S. demands in the renegotiation of the North American Free Trade Agreement. So far, the two trading partners in the 24-year-old pact have flatly rejected Trump’s effort to link the two issues.

“The negotiation process for the modernization of NAFTA will follow its course independently of this or any domestic policy measure taken by the United States government,” Mexico’s Finance Ministry said Thursday in a statement.

Trump and administration officials said other factors that would be considered for exemption from the tariffs could include reducing a bilateral trade deficit with the U.S. or coughing up more money for joint international security expenses. China, Trump noted, is currently discussing ways to reduce its overall trade surplus with the U.S.

While Trump has often cast himself as a deal maker, it’s far from clear whether his strategy will work or how other nations will respond.

The European Union and other trading partners of the U.S. will be reluctant to make concessions to placate Trump to get off the hook on the new tariffs. On the other hand, responding with a tit-for-tat manner could escalate trade conflicts that would hurt everybody in the long run.

Trump signaled that the White House is open to any and all offers, in an effort to show flexibility to ease the concerns of his fellow conservatives. Republicans and businesspeople have long championed free trade, and earlier this week, Trump’s top economic adviser, Gary Cohn, resigned after losing an internal battle with nationalists in the administration over the tariffs.

But Trump now risks weakening the legal argument that the protections are needed for national security or to help the U.S. steel and aluminum industries.

And the chaotic rollout of the tariffs, lack of details and the uncertain process that lies ahead could mean that the plan — like so many other Trump programs — finds itself tied up in legal challenges.

“Action is needed to address the worldwide overcapacity of steel, but I believe we should take a more targeted approach,” Sen. Rob Portman (R-Ohio) said. “We should focus on countries that distort markets and repeatedly violate trade laws, and on the steel and aluminum products that are most at risk from a national security perspective. I am concerned that broad-based tariffs will have unintended consequences for downstream steel and aluminum users and will unnecessarily invite retaliation in the form of tariffs against U.S. exports.”

In making his boldest use of presidential trading power to date, Trump invoked a U.S. law that allows the president to restrict trade on the basis of national security, the first time in more than three decades that that rationale has been invoked to implement protectionist measures to shield a domestic industry from import competition.

Standing in front of 10 steelworkers in factory uniforms on Thursday, Trump emphasized the importance of steel and aluminum to America’s defense industry. “You don’t have steel, you don’t have a country.”

But in exempting Canada and Mexico — and leaving wiggle room for other countries to get tariff waivers as well — Trump has undercut his own claim that the duties are necessary to protect national security, said James Bacchus, a former House lawmaker and ex-chairman of the appellate body of the World Trade Organization.

“This is looking less and less like a national security measure and more and more like economic pressure,” Bacchus said, noting that the cherry-picking of countries to exclude was a clear violation of WTO rules. He and other experts expect Trump’s tariff orders to be challenged at the WTO.

“I’m pleased that administration officials have indicated that there may be some exemptions from this policy, including for Canada and Mexico while an updated NAFTA is negotiated,” Portman said. “In addition, I continue to believe that we must do more to use the tools we have available to us to protect American jobs.

The U.S. also could be hit with retaliatory tariffs. In anticipation of the tariff orders, EU leaders earlier in the week endorsed a plan to target for countertariffs items such as American steel, chewing tobacco and orange juice. EU members such as Germany and the United Kingdom export hundreds of millions of dollars of steel to the U.S.

Canada is the largest American source of foreign steel and aluminum, and Mexico is among the top five, as metals from both countries are shipped across North American borders for production of things such as cars and appliances. South Korea and Japan, as well as North Atlantic Treaty Organization member Turkey, also stand to be among the biggest losers if the tariffs take effect.

China is the world’s largest manufacturer and exporter of steel and aluminum, and has been blamed for overproducing metals that have created a global glut and indirectly hurt the U.S. industry and jobs. 

“For far too long, Chinese cheating has shuttered steel plants across our state and put Ohioans out of work,” Sen. Sherrod Brown (D-Ohio) said Thursday. “Today’s action finally sends a clear message to our trading partners that we aren’t going to allow them to cheat Americans out of their jobs and infect global markets. By standing up for steel jobs today, we’re also protecting American jobs up the supply chain from becoming the next victims of Chinese cheating.”

However, because of many prior U.S. tariff measures on individual steel products, China accounts for only about 2.5 percent of U.S. imports of steel.

For that reason, U.S. business interests, GOP lawmakers and manufacturing groups pressed Trump not to issue blanket tariffs. Instead, they urged Trump to take actions that could address that root problem or target China and other select nations that the Trump administration says are buying Chinese steel and selling to the United States.

After Trump issued the tariff decrees, Sen. Lamar Alexander, R-Tenn., said he was heartened by the president’s insistence that he would be flexible in invoking tariffs. “I’m encouraged,” Alexander said, although he has warned that the tariffs would cost jobs in his state.

Other Republicans were far less diplomatic.

“These so-called ‘flexible tariffs’ are a marriage of two lethal poisons to economic growth — protectionism and uncertainty,” said Sen. Jeff Flake (R-Ariz.).

Sen. Ben Sasse (R-Neb.) called it “a really stupid policy,” saying: “It’s going to hurt American consumers, and it’s going to hurt American workers.”

Despite the vocal opposition, it was doubtful whether Congress would attempt to block Trump’s orders. Other Democrats besides Brown supported the tariffs as helpful to American workers. “I’m glad we are finally standing up for ourselves,” said West Virginia Sen. Joe Manchin III.

Although the tariffs will help domestic producers, at least for awhile, economists and other U.S. businesses that use imported steel said that the tariffs would drive up metal prices, hurt consumers and ultimately lead to net job losses for Americans.

Brown and Portman both cited the Leveling the Playing Field Act, which they co-authored, as a tool for holding accountable countries that violate trade laws and international rules.

“Using the Leveling the Playing Field Act, we have won four trade cases in the past two years on steel and aluminum products,” Portman said. “As a result of winning these cases, there are new tariffs on key steel imports – cold-rolled, hot-rolled and corrosion-resistant steel.”

Also Thursday, Brown, Portman and Sen. Bob Casey (D-Pa.) sent a letter to Trump urging him to prioritize electrical steel in any section 232 trade remedy.

As currently constructed, AK Steel — the last electrical steel manufacturer in the United State — is unlikely to fully benefit from the remedy announced, Portman said. AK Steel has a grain-oriented electrical steel production line in Butler, Pa and a finishing line in Zanesville.

If the company doesn’t get relief, it might have to shut down the last production line in the entire country of grain-oriented electrical steel, which is a key component of the power transformers that make up our critical infrastructure, Portman said.

“We write you today to share our concerns that your proposed section 232 remedy is incomplete when it comes to electrical steel,” said the senators in their letter. “We write on behalf of a constituent company, AK Steel, which is the last domestic producer of grain-oriented electrical steel (GOES). Since the remedy, as currently constructed, does not include electrical cores and core parts, the remedy will not be effective for the domestic electrical steel market. We urge you to consider the concerns we have raised and work with us as you finalize the section 232 remedy.”

Part of Portman’s statement issued Thursday after Trump’s tariff announcement included comments about AK Steel.

“We need a more balanced approach that provides relief for the U.S. steel industry in a targeted way, by countries and products,” Portman said. “For example, we know that imports of grain-oriented electrical steel have increased by 101 percent in the last year while prices dropped between 30 to 35 percent. Without relief, AK Steel – the last electrical steel manufacturer in the United States – has told me they’ll have to shut down the last production line in the entire country of grain-oriented electrical steel, which is a key component of the power transformers that make up our critical infrastructure.

“Yet as currently constructed, AK Steel is unlikely to fully benefit from the remedy proposed by the president. I’ve urged him to reconsider this issue and make electrical steel a priority so AK Steel can fully benefit from this remedy and we can protect these jobs. A more focused and balanced approach will provide relief to the products most at risk, like electrical steel, while minimizing the potential harm to downstream steel and aluminum users.”


(Los Angeles Times staff writers Cathleen Decker in Washington and Kate Linthicum in Mexico contributed to this report.)


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