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Trump Looking at Quotas to Replace Tariffs

Wednesday, May 1, 2019

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As President Donald J. Trump works to update the United States-Mexico-Canada Agreement, one steel executive has gone on record to say he thinks a quota system will replace the current tariffs that the steel and aluminum industry are currently subjected to.

Steel Dynamics CEO Mark Millett said at the company’s first-quarter earnings conference last week that, “We anticipate reciprocal 232 tariffs between the U.S., Canada and Mexico will be replaced by alternative effective quarter base programs among the USMCA countries prior to ratification of the agreement later this year.”

Tariff Background

The tariffs were instituted over a period of months last year and affect steel from other countries across the globe, including China, Canada, Mexico and the European Union. The assigned duties are 25% on steel products and 10% on aluminum.

© iStock.com / Leonid Eremeychuk

As President Donald J. Trump works to update the United States-Mexico-Canada Agreement, one steel executive has gone on record to say he thinks a quota system will replace the current tariffs that the steel and aluminum industry are currently subjected to.

Companies that feel they need to use steel or aluminum from another country—because that particular product isn’t made in the U.S., for example—have the opportunity to apply for an exemption.

In many cases, though, steelmakers have filed objections to other companies’ exemption requests and some of the companies whose exemptions are in question have accused steelmakers of dishonesty in their objections.

In terms of Canada and Mexico, Trump reached a deal to rework the 1994 North American Free Trade Agreement, but Congress has to approve the deal.

What Now

What Millett had described was a tariff rate quota system, which would mean that the materials coming into the U.S. would be subject to a tariff only after a certain quantity is reached.

Trump and his top advisors reportedly are refusing to cancel the tariffs on Canada and Mexico until they accept quotas on their metals exports.

While much of the steel industry is in support of this move, opposition is coming from most other sides.

Top Republicans including Finance Committee Chairman Sen. Charles E. Grassley (R-Iowa) has said that Congress won’t approve a new USMCA deal until the tariffs are completely removed. Canada and Mexico are also both reportedly hung up on the tariffs portion of the deal.

In addition, some in the aluminum industry are coming out against the quotas, with the fear that they will raise prices on aluminum-dependent goods.

The goal is reportedly to get the deal approved by Congress’s annual August recess.

   

Tagged categories: Aluminum; Asia Pacific; EMEA (Europe, Middle East and Africa); Good Technical Practice; Government; Latin America; North America; President Trump; Steel; Z-Continents

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