STEEL
Tariff Talks
March 2019
Over the last few years, tariffs have been a much-publicised driver of steel prices and demand. Depending on who you ask, the US’s steel tariffs are either the end of its industry or the herald of a new era in production and employment—but either way, there’s no denying the effects its tariffs have had on the rest of the world. Countries may be breathing a sigh of relief as the US delays its tariff hike initially scheduled for March 1, but that’s not the end of the story.

European Union

The EU has decided to make its steel tariffs permanent as of February, matching the currently-held US duties, placing limits on imports on a per-country and global basis, and leaning further into protectionism as it seeks to avoid its market being flooded with re-directed capacity originally destined for the US. This move has frustrated many of its trading partners, including Brazil—which has sought compensation for these measures.

In response, Brazil—the tenth-largest steel exporter, sending much of its steel to Germany—has notified the World Trade Organisation that it will seek to either secure compensation and potentially place retaliatory measures “in order to rebalance” its trade with the EU. Brazil exports about 15Mt of steel per year (US$9.bn), of which 25% goes to Europe—largely in the form of cold-rolled product and heavy plates.

Further into the EU, the UK has confirmed that it will keep many market protections in place post-Brexit. Its most significant statement has been that it will keep tariffs on China to prevent the dumping of cheap steel into its market, but it will also keep a series of end-product tariffs. It has also indicated that, once out of the EU, these tariffs may apply to some EU-member countries.

 

 

Mexico

Looking at the North American market, Mexico has undergone some deliberation on tariffs. After letting its 2015-era 15% steel tariff lapse in January, the government has confirmed that it will double back and renew the tariffs for another six months. The tariff will apply to all countries it does not have a free trade agreement with and be applied to the same 186 products it previously covered.

Mexico has been seeking an exemption to the US tariffs and may secure this as part of the upcoming US-Mexico-Canada Agreement (USMCA), set to follow the 1994 North American Free Trade Agreement. Mexico has reiterated that its own steel tariffs will not be applied to Canada or the US.

 

Canada

For its part, Canada has been insistent that the US’s steel tariffs are an unacceptable barrier to ratifying the USMCA. The current government has signaled that it will refuse to ratify the deal until Canada and Mexico secure exemptions from current and future tariffs. Talks and negotiation for the USMCA have been underway for over a year, and while the US has acknowledged Canada’s stance on the tariffs and said that it is “considering” measures to mitigate their impact, it has not made any move to lift them.

 

United States

In fact, the US seems to be considering additional tariffs that would include further Canadian steel products. It has so far avoided raising its wide-ranging tariffs, but it has placed additional anti-dumping duties on welded steel pipe from Canada, South Korea, Turkey and Greece, with duties ranging from 5% to 20%.

It is also opening yet another anti-dumping probe, this time into structural steel imports from China, Canada, and Mexico. The Commerce Department has confirmed the probe, based on a petition filed earlier this month by a U.S. steel trade group, will consider whether to seek duties of about 30% for Canada and Mexico—and a sky-high 222% for China—in response to below-market price imports. Deliberations are expected to last until September, although the International Trade Commission will hand down a preliminary determination by March 21.

 

India

After petitioning consistently for exemptions to US’s steel tariffs throughout 2018, India may be near to securing a trade deal that would exempt it from steel tariffs and easier mutual access to farm and dairy markets. As talks progress, India has postponed its upcoming retaliatory tariffs on US goods. The new deadline is now set for April 1, and India is hoping to secure a permanent deal by that time.

Japan has applied to the WTO to settle an ongoing dispute over India’s existing steel safeguard measures—initially placed in September of 2015, and later bolstered by a series of minimum price requirements. The WTO has upheld previous complaints by Japan against India’s safeguards.