March 2, 2018
On March 1, 2018 President Trump announced his Administration will be imposing significant tariffs on steel and aluminum imports as early as next week. As the proposal stands, steel imports would face a 25% tariff and aluminum imports would face a 10% tariff. The announcement follows reports released on February 16, 2018 by the Department of Commerce on the Section 232 investigations which concluded steel and aluminum imports are a threat to U.S. national security. One thing that is not yet clear is whether the tariffs will apply to some countries or all trading partners and whether the Administration will allow for an exemption process before or after implementing the tariffs.
The impromptu announcement came during a White House meeting of steel and aluminum industry leaders yesterday and sparked immediate backlash from Republican lawmakers, companies, and industry leaders who have warned against the sweeping effects tariffs would have on businesses and U.S. trade relations. Chairman of the Senate Finance Committee Orrin Hatch (R-UT) stated, “Tariffs on steel and aluminum are a tax hike the American people don’t need and can’t afford. I encourage the president to carefully consider all of the implications of raising the cost of steel and aluminum on American manufacturers and consumers…” Other Senate Republicans have signaled Congress will formally push back against the tariffs with Senate Republican Conference Chair Sen. John Thune (R-SD) stating, “We are going to have some conversations about that, about what we can do to shape this…I don’t know what that would look like at the moment.” These concerns were echoed by House Speaker Paul Ryan (R-WI), his spokesman saying, “The Speaker is hoping the president will consider the unintended consequences of this idea and look at other approaches before moving forward.”
There has been great division within the Administration during much of President Trump’s term in office on imposing across the board tariffs. Economic Advisor Gary Cohn, Treasury Secretary Steven Mnuchin, Secretary of State Rex Tillerson, and Defense Secretary James Mattis have been actively lobbying the President against such a measure. Moreover, Secretary Mattis has warned the President that broad tariffs could backfire and create a different national security problem, instead recommending a targeted system of tariffs on countries whose trade practices pose a high national security risk to the U.S. The move has generated significant international backlash causing key U.S. allies including the EU and Canada to threaten immediate and firm retaliation to this decision. Unnamed sources have also confirmed that Mexico is considering similar retaliatory measures.
Given the protests the protectionist tariffs have ignited from lawmakers, U.S. allies, and the business community alike, it is unclear whether certain countries or industries will ultimately receive exemptions from the measure or whether the President will redact the announcement entirely, neither of which would be unprecedented for this Administration. Additionally, the immediate 500-point plummet of the stock market following the announcement could influence the President’s next move given he regularly cites the success of the stock market as a referendum on his leadership. However, if tariffs are ultimately enacted, whether targeted or across the board, those countries that are hit are likely to prepare retaliatory tariffs on key U.S. exports, sectors, and companies to create maximum pain for the President.
FTI Consulting’s team of trade experts is closely monitoring this issue and is uniquely positioned to help companies navigate the ultimate outcome of the Administration’s tariff policy using our broad international network as well as the Trade Leadership Coalition, an integrated communications and advocacy vehicle. We will continue to keep you apprised of any major developments. As always, please reach out with any questions or concerns.