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Exemptions on US tariffs would open a Pandora’s box
March 09, 2018
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WASHINGTON: President Trump is expected as early as Thursday to sign off on his controversial plan to slap stiff tariffs on imported steel and aluminium, but in a surprise reversal the White House opened the door to exemptions for products from Canada, Mexico and other US allies.

Carve-outs for certain countries from Trump’s proposed double-digit duties would mark a retreat from the president’s insistence earlier that the levy would be across the board.

And that could mollify leading US trading partners and allies that have roundly criticised the tariffs and threatened to respond with retaliatory measures.

Excluding allies from the tariffs also could help the Trump better focus on his intended target, China, especially at a time when the US and other Western powers have begun to take a more skeptical view of Beijing in light of the Chinese leadership’s increasingly assertive and expansionist activities.

Though China’s overproduction of steel is seen as the primary cause of a global glut, the United States gets a relatively small amount of imported metals from China. Instead, most US steel and aluminium imports come from Canada and other allies.

So sharp opposition and threats of retaliation have come not from Beijing, but from Washington’s staunchest allies. European Union leaders Wednesday endorsed a plan to target for counter-tariffs items such as American steel, chewing tobacco and orange juice.

“Right now what this is doing is getting all of Europe’s attention and energy, (and a) focus on pushing back against the United States, not pushing on China,” said Jennifer Hillman, a Georgetown University law professor and former member of the World Trade Organization’s appellate body.

Trump’s announcement last week that he would apply blanket tariffs of 25 per cent on imported steel and 10 per cent on aluminium shocked trading partners and led to the resignation of the White House National Economic Council director, Gary Cohn.

As Trump’s top economic advisor, Cohn had been a moderating influence on Trump’s protectionist impulses, but the president went ahead with the tariff proclamations despite Cohn’s advice and that of congressional Republicans and business leaders that such action could hurt economic growth and lead to a trade war.

On Wednesday, 107 House Republicans sent Trump a letter urging him “to reconsider the idea of broad tariffs to avoid unintended negative consequences to the US economy and its workers.”

White House Press Secretary Sarah Huckabee Sanders confirmed that Trump’s proposed tariffs would be formalized by week’s end. She said the final plan could allow countries to be excluded.

“There are potential carve-outs for Mexico and Canada based on national security and possibly other countries as well, based on that process,” Sanders said. She added that decisions would be made on a “case-by-case and country-by-country basis.” Previously administration officials had resisted any exemptions, warning it would open a Pandora’s box.

Trump’s tariff authority comes from a US law that allows the president wide discretion to apply duties or other restrictions if the Commerce Department has found imports present a threat to national security. That determination was made _ the first time a US president has done so under the law in decades. After formally being announced by the president, the tariffs must be implemented within 15 days, Hillman said. That window would give nations and companies time to request exemptions.

Canada is by far the largest single shipper of steel and aluminium to the United States. And Mexico, South Korea and Japan, as well as North Atlantic Treaty Organization members such as Germany and Turkey, stand to be among the biggest losers if the tariffs take effect.

China, by contrast, accounted for just 2.4 per cent of all iron and steel imports to the United States last year, thanks to many prior American dumping duties placed against various Chinese steel products in preceding years.

“I think ultimately that Mexico and Canada are part of the solution on steel, whether that’s declared later this week or down the road,” said Scott Paul, president of the Alliance for American Manufacturing, a group that has advocated for strong actions to protect US steel producers.

Paul added, however, that “we must ensure that the governments of Mexico and Canada are vigilant against circumvention, join the US in active trade actions to keep excess steel out of the North American market, and renegotiate NAFTA to work better for workers in all three nations.”

China, for its part, has said very little about the proposed tariffs, apparently having decided to wait until the duties are finalized and made public. The Chinese know that Trump in the past has said one thing and changed his mind later.

“The Chinese are trying to play the long game, whereas the EU and allies are frustrated,” said Andy Rothman, a former economic officer at the US Embassy in Beijing and now an investment strategist for Matthews Asia in San Francisco. “Their rhetoric was quite calm and restrained,” he said, although prior to the tariff announcement, Beijing sent a warning that US protectionist measures could be met with limits on American imports of sorghum and other farm goods to China.

In the last year, the administration has issued anti-dumping and illegal subsidy duties on individual Chinese products, as it has on those of other countries. Trump has also opened an investigation into China’s theft of intellectual property and forced technology transfer, which could result in significant punitive actions such as large tariffs or restrictions on imported electronics from China. But many viewed across-the-board tariffs as a blunt instrument that would miss the target and undercut a united front with allies to tackle the problem. In short, analysts said, with the proposed tariffs, Trump was picking a fight with the very people he needed to help him pressure China.

“It seems to almost target our friends more than China,” said David M. Lampton, director of China studies at the Johns Hopkins School of Advanced International Studies in Washington.

Lampton saw the tariffs as particularly ill-timed and counterproductive because the United States, along with others in the West, have undertaken a broad reassessment of their approach to China after Beijing’s retreat from a 2013 pledge to liberalize its markets and aggressive actions in the South China Sea and at home to snuff out dissent.

Even as Trump himself has sent conflicting messages on China, excoriating Beijing on trade while praising Xi and his bid to eliminate term limits, the Trump administration has singled out China, along with Russia, as a major threat to American security and prosperity.

Tribune News Service

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