Last month, U.S. President Donald Trump slapped tariffs of 25% on steel imports and 10% on imported aluminum, but granted allies a temporary exemption until yesterday, May 1, 2018.

The tariffs are part of a push to tighten access to the U.S. market for politically sensitive imports. President Trump also said they were intended to bring countries to the negotiating table to address what he sees as unfair imbalances in trade.

A mere 11 hours after the U.S. listed 1,333 Chinese products to be hit with punitive tariffs, Beijing imposed similar 25% penalties on 106 American-made products. 

The U.S. is targeting products in high tech and industrial sectors where China wants to be a world leader by 2025. The U.S. excluded products where penalties might cause disruption to the U.S. economy or those that would hit consumers hard. None of the top five U.S. imports goods from China is affected by the tariffs.

So far, the U.S. has imposed tariffs on solar panels and washing machines in January, and aluminum and steel in March, all of which affect China. China sells mainly daily necessities to the U.S. that usually have low profit margins, while the U.S. sells items like aircraft and automobiles to China, ones that undeniably have more added values.

After China responded with a list of U.S. goods that would be subject to tariffs, Trump raised the stakes on April 4 by directing the U.S. Trade Representative to consider $100 billion in additional levies.

 

Exemptions

The exemptions for allies were announced as temporary, with a May 1 expiration date. Australia, Canada, the European Union, and Mexico have been granted exemptions.

Japan desired to be excluded from the steel and aluminum tariffs that went into effect last month.

Plenty of American companies that import steel and aluminum are seeking an exemption from the tariffs, too.

It's been about a month since the Trump administration opened the exemption application process, and in that time, the Department of Commence has received about 2,200 applications.

 

International community perceptions and actions

European Union. Cecilia Malmstrom, the European Union's trade commissioner, also said the bloc would not offer any concessions in order to be exempt from the U.S. import duties ahead of a May 1 deadline in talks. 

Korea. Seoul — the world's third-largest exporter of steel to the U.S. — has agreed to reduce those exports by 30%, essentially agreeing to a quota in return for an indefinite exemption from tariffs.

China. They would impose the planned tariffs only when the U.S. does so. Chinese President Xi Jinping promised to open the country’s economy further and lower import tariffs on products like cars, in a speech seen as an attempt to defuse an escalating trade dispute with the U.S.

Russia. Demanding compensation for U.S. steel tariffs, Moscow has joined the EU, India, and other nations in seeking rebates from Washington via the World Trade Organization (WTO).

Australia. Australian Industry Group says temporary exemption may be extended for another 30 days from May 1 as a more permanent deal remains elusive.

 

 

Consequences

  • China has filed a WTO complaint challenging U.S. President Trump's tariff hike on imported steel and aluminum.
  • Latin American countries like Brazil and Argentina, as well as Australia, could see demand for their exports grow.
  • China has requested 60 days of consultations with the U.S. on the steel and aluminum dispute, said the WTO. If that fails, the next step could be for Beijing to request a ruling from a panel of trade experts.
  • The EU has drawn up a list of "rebalancing" duties worth some 2.8 billion euros ($3.4 billion) to slap on U.S. products if it is not permanently excluded.
  • China imposed a temporary 179% tariff on U.S. sorghum. China is the largest buyer of U.S. sorghum. China relies almost entirely on the U.S for its sorghum, importing about $1 billion worth of the grain a year.
  • Tariffs on steel and aluminum imports are boosting costs for equipment and infrastructure and causing some American farmers and agricultural firms to scrap purchases and expansion plans.
  • Transshipments are likely to be a major part of any negotiations between China and the U.S. aimed at the tariffs. They could also figure into conversations with Europe, South Korea, Canada, and other major partners looking to extend their exemptions from U.S. steel tariffs. The governments may need to be on alert to make sure they do not become way stations.

 

You can read more about this topic on CNBC, Forbes, and The Tribune.