If American almond, citrus, pork, apple and dairy farmers want any chance of regaining their markets in China, Mexico and Canada, U.S. steel and aluminum tariffs will likely have to be lifted. The problem, however, is the threat of cheap foreign metal flooding the U.S. market is now as high as ever.
It’s not a fact lost on President Donald Trump, who early on made it a priority to bring domestic prices up for the metals and protect the industry. Prices have risen, breathing new life into U.S. producers, according to the American Iron and Steel Institute (AISI), but the global threat remains.
“Steel tariffs are working,” AISI said in a statement provided to Agri-Pulse. “Momentum in the steel industry as result of the Section 232 remedy, the administration’s policy actions and favorable economy are allowing companies to reopen idled mills, invest in new facilities and create jobs.”
The Trump administration, arguing that Chinese overproduction of metals was a threat to national security, hit the country and other nations around the globe about a year ago with a 25 percent tariff on steel and a 10 percent tariff on aluminum. China ships very little steel and aluminum directly to the U.S., but the metals also make their way here by transshipment through third countries. China hit back with tariffs on $3 billion worth of U.S. farm goods, like oranges, walnuts, dairy and broccoli.
“The U.S. apple industry worked very hard over years, and in 2015 finally achieved full access to the Chinese market, just as China has access to our market,” U.S. Apple Association President Jim Bair said in response to China’s retaliation. “China’s retaliatory response to U.S. tariffs (is) just the latest chapter in a long and sad story where U.S. apple growers get hurt in a fight we didn’t start and in which we have no interest.”
The U.S. at first held off on levying the 232 tariffs on Canada and Mexico because talks were underway to rewrite the North American Free Trade Agreement, but the import taxes went into place May 31 when negotiations stalled. Mexico was the first to retaliate, hitting U.S. pork, cheese, apples and potatoes with tariffs, and Canada followed suit by taxing value-added products like ketchup, strawberry jam, yogurt, maple syrup and whiskey.
Trump's position that the import taxes are lawful under Section 232 of the Trade Expansion Act of 1962 was recently upheld by the U.S. Court of International Trade.
Global steel and aluminum production remains high, however, despite Trump’s 232 tariffs, making the import taxes as crucial as ever to protect U.S. producers from international competition. That helps explain Trump’s unwillingness to abandon any of the tariffs — even on neighboring allies like Canada and Mexico — but it’s also creating an increasingly difficult situation for American farmers and ranchers who are suffering from retaliation to Trump’s tariffs.
The AISI argues that the “Section 232 trade remedy remains necessary as there is still more work to be done and progress to be made. Despite recent momentum, global steel overcapacity remains over 600 million net tons, and China produced more than one billion net tons of cheap, government-subsidized steel in 2018 — more than 10 times U.S. production.”
Monthly steel production worldwide hit about 147 million metric tons in January, according to the World Steel Association. That’s up from 132 million tons in February 2018, the month before the U.S. tariffs went into place. Those tariffs, Trump administration officials explained, were aimed at stopping subsidized Chinese production, which has also climbed. Chinese output rose to 75 million tons in January, up from just 65 million tons in February 2018.
A year ago China was producing more than half of all the aluminum in the world and, as of February, that’s still the case, according to data from the International Aluminum Institute that showed Chinese output rising.
U.S. ag producers are seeing their exports of everything from pork to pistachios plummet, but the threat of foreign steel and aluminum is as strong as ever, and Trump’s tariffs are widely seen as successful in pushing up domestic metals prices.
Joel Nelsen, strategic advisor and past president of California Citrus Mutual, says the fact that the 232 tariffs have helped U.S. steel and aluminum producers but failed to address Chinese over-production puts the Trump administration in a difficult spot.
“As a result, the administration is left with fewer tools to accomplish its objective,” he told Agri-Pulse. “How they’re going to do it now without negatively affecting innocent victims like growers of citrus … is yet to be determined. I don’t know what the answer is.”
Chinese importers now have to pay 51 percent in import taxes to buy California oranges thanks to China’s retaliation to the 232 tariffs as well as separate US tariffs aimed at punishing China for intellectual property theft. Many Chinese buyers, Nelsen said, are opting to import their citrus from elsewhere.
But it’s not just farmers and ranchers who are pushing back on the Trump tariffs. A long list of GOP lawmakers is supporting legislation to take back some of the tariff authority Congress gave away nearly 60 years ago.
“The U.S. Constitution gives Congress alone the job of regulating commerce with foreign nations,” Senate Finance Committee Chairman Chuck Grassley said in a statement last week as he claimed leadership of the efforts on Capitol Hill to counter Trump’s tariffs.
“During the height of the Cold War, Congress delegated sweeping power to the executive branch to adjust imports on the basis of national security,” Grassley said. “That was understandable given the era, but the benefit of time and experience has proven our Founders right in tasking Congress with authority over tariffs.”
Sen. Pat Toomey, R-Penn., already has strong bipartisan support for his Bicameral Congressional Trade Authority Act, as does Sen. Rob Portman, R-Ohio, for his Trade Security Act.
But calls from Congress for Trump to back off his steel and aluminum tariffs seem to be falling on deaf ears in the White House. Grassley, Toomey, Portman and others have their work cut out for them because Trump appears to be holding tightly to the tariff authority.
Mexican, Canadian and even U.S. government officials had expected the Trump administration to lift the 232 tariffs on Canada and Mexico after the leaders of all three countries signed off on the USMCA last year, but that didn’t happen. And even now, after Canadian and Mexican officials warned the Trump administration that their legislatures will not ratify the pact with the tariffs in place, they remain in place.
U.S. Trade Representative Robert Lighthizer has said he is negotiating an end to the tariffs with Mexico and Canada, perhaps by requiring tariff-rate quotas, but those talks appear unfruitful so far.
"The existence of these tariffs for many Canadians raises some serious questions about NAFTA ratification," Canadian Foreign Affairs Minister Chrystia Freeland told CBC Radio-Canada after leaving a meeting with Lighthizer last week.
As to China, the country has made no move to cut its steel and aluminum production, and it's unclear if the two countries are even discussing the issue as negotiators continue to meet. Lighthizer led a U.S. delegation to Beijing last week, and Chinese Vice Premier Liu He is leading a Chinese delegation for talks in Washington this week. China has shown signs it is willing to deal with the U.S. on issues like currency manipulation and intellectual property theft, but not on cutting back steel and aluminum output.
A USTR spokesperson refused to comment when asked if the metal tariffs were being negotiated.
In a February meeting with Liu in the Oval Office, Trump called on White House trade adviser and China critic Peter Navarro to chime in.
“Peter, would you like to say something?” Trump said. “This is a gentleman that loves tariffs, by the way. He’s like me. He and I — he loves tariffs. Peter, go ahead.”
“I agree with you, sir,” Navarro replied tersely. “Tariffs are simple and they’re enforceable.”
“Right. Right. Okay,” Trump said. “That’s all you have to say? But it’s — it’s true.”
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