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Trump’s Steel Tariffs – Sledghammer is the Wrong Tool

Published on March 02, 2018

Bi-Weekly BC Blog

By Andrew Wynn-Williams, Divisional Vice President, BC

The US President surprised everyone yesterday, including his own advisors and probably even himself, by suddenly announcing significant tariffs on steel and aluminum. As usual with this confusing White House, how this is actually going to be applied and to who is very unclear. If it does apply to Canada this will have real negative impact both in Canada and the US. 

We can only hope that, at the very least, Canada will end up being exempted from this sweeping measure. If it isn’t however, then the negative impact would be a double whammy. If the tariffs apply here, then it would render our steel uncompetitive in the US, our largest market. At the same time, when the tariffs are applied to Chinese steel, a lot of it might be diverted to Canada’s market instead. Flooding us with cheap, subsidised steel would decimate the industry here. In the US it would increase the costs of a host of other manufacturing industries and hence the cost to the US consumer. It would also impact on the price of US exports that use steel as a component. 

There is some understanding of what the President is trying to address but the tool used is just wrong. There is little doubt that government-owned Chinese steel companies dump subsidised steel into world markets in order to meet production quotas. This then gets the world hooked on cheap Chinese steel. 

Canada has used formal trade agreements and the law to address this. Essentially we seek remedies targeted at the steel being brought in, prove dumping, and then seek tariffs that normalise that price appropriately. This is what international trade rules and agreements are for. 

Mr. Trump has instead used a 1962 law designed to protect supply chains during the cold war. It allows him to put a tariff on whatever he likes if he deems it a matter of national security. In other words, it circumvents trade agreements. He is using a sledgehammer when he should be using a scalpel. The net result is that instead of legal remedies, the offended countries can only respond in kind - with sweeping measures that could undermine international trade on a broader level. 

This whole issue is an example of why CME has been pushing for NAFTA to include provisions that allow the three signatories to address these issues as a team. It would be far more effective for the three countries to work together in addressing issues like dumping. It would avoid the secondary negative impact of shifting the subsidised product to a neighbour and allow us much more leverage with the offending country in negotiations.

Found in: US Tariffs steel constructors steel

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