Extra month of tariff relief

Trump grants key U.S. allies an extra month of tariff relief

The deadline has been moved back to June 1.

By MEGAN CASSELLA

President Donald Trump has decided to extend by one month a temporary exemption from steel and aluminum tariffs for Canada, Mexico and the European Union, the White House announced Monday evening.

The move gives key allies — and three of the U.S.' four largest trading partners — until June 1 to reach some sort of deal with the Trump administration to avoid duties of 25 percent on steel and 10 percent on aluminum exports sent to the United States. The tariffs had been set to take effect at 12:01 a.m. Tuesday if Trump had not moved to extend the deadline.

The administration has also reached preliminary agreements with three other countries that had initially been granted a temporary exemption — Argentina, Brazil and Australia — allowing them to escape the duties as details are finalized over the next 30 days, the White House said. Trump did not set a deadline for those details to be worked out but said he would consider reimposing the tariffs if the agreements are not finalized "shortly."

One other country, South Korea, had already reached a preliminary deal for a permanent exemption from the steel tariffs because it agreed to cap its exports to the U.S. at 70 percent of the average export volume over the previous three years. Trump's official proclamation said the administration will monitor the implementation and effectiveness of that quota and left room for Trump to "revisit" his decision if needed.

"In all of these negotiations, the administration is focused on quotas that will restrain imports, prevent transshipment, and protect the national security," the White House said in its declaration. "These agreements underscore the Trump administration's successful strategy to reach fair outcomes with allies to protect our national security and address global challenges to the steel and aluminum industries."

The declaration brings some clarity to a decision-making process that until the official release left key allies wondering whether they would beginning Tuesday face penalties sure to roil international markets and disrupt global supply chains. Few people inside the White House or overseas had been sure of what or even when Trump would decide.

Imposing the duties would also have affected foreign steel industries that depend on access to the U.S. market. Canada and Mexico both send more than half of their steel produced annually into the United States, while the 28 nations of the EU together serve as the largest single supplier of steel to the U.S.

Of $29.1 billion worth of steel that the United States imported last year, $6.2 billion came from the 28 nations of the EU and $2.9 billion from other European countries. About $5.1 billion came from Canada, $2.8 billion from South Korea, $2.5 billion from Mexico, $1.6 billion from Japan, $1.4 billion from Russia and just $976 million from China.

A U.K. government spokesperson called the extension "positive" and said EU countries would continue to work to reach a permanent solution.

“We remain concerned about the impact of these tariffs on global trade and will continue to work with the EU on a multilateral solution to the global problem of overcapacity, as well as to manage the impact on domestic markets,” the spokesperson said in a statement Monday night.

Although the move grants some of the United States' closest allies another month to work out a deal, it remains unclear what sort of concessions would satisfy Trump and his administration.

Commerce Secretary Wilbur Ross and other administration officials have said in recent days that countries would have to choose between either quotas or tariffs — but the EU, Canada and Mexico have said they expect a full exemption without having to agree to such restrictions.

“We’re busy alienating the few friends we have left,” said Bill Reinsch, a senior adviser at the Center for Strategic and International Studies. “The president clearly, on trade issues, doesn’t make a distinction between the good guys and the bad guys. If you’re not doing exactly what he wants, you’re a bad guy by definition — and nothing else counts.”

The process of deciding on the exclusions and exemptions has been chaotic since the departure of former White House staff secretary Rob Porter, who was heavily invested in trade policy and making sure that differing viewpoints were included in the decision-making process.

U.S. Trade Representative Robert Lighthizer, meanwhile, has had myriad policy questions on his plate, including the ongoing NAFTA talks and his upcoming trip to China later this week to talk trade.

With any final decision still up in the air, some nations have indicated exactly how they will retaliate if and when Trump does impose the tariffs. The European Union last month generated a list of U.S. exports ranging from peanut butter to lipstick and yachts that would face punitive 25 percent duties on their way into the European market if Brussels is not spared. The EU’s list, which is valued at roughly $3.4 billion, is largely comprised of products from Republican states and districts that would bear the brunt of the tariff impact.

At the same time, European nations have also been working among themselves and with the United States to strike a compromise. German Chancellor Angela Merkel and French President Emmanuel Macron both traveled to the White House last week to talk face-to-face about the issue with Trump, who is still toying with the decision.

Merkel and Macron both spoke over the weekend with U.K. Prime Minister Theresa May about the “vital importance” of Europe’s steel and aluminum industries and pledged to work together with the rest of the EU to push for a compromise and a permanent exemption.

To that end, EU Trade Commissioner Cecilia Malmström also spoke again over the phone on Monday with Ross.

Tensions are similarly high with Canada and Mexico, who are in intensive trade negotiations with the United States to update NAFTA.

Both countries have repeatedly made clear that they expect to be granted a full, permanent exemption from the tariffs without having to agree to quotas or any other restrictions. But their temporary reprieve was contingent upon a successful completion of the NAFTA rewrite — and with that deal still at least a week away, it remains unclear whether Trump will make the exemption permanent or at least extend it on a temporary basis while negotiations continue.

For either of the U.S. neighbors, imposition of the duties would ratchet up trade tensions at a time when all three countries are working to wrap up a NAFTA negotiation that has already been technically and politically difficult.

"Obviously, Lighthizer knows very clearly our position and how we have to react if any measure is imposed,” Mexican Economy Secretary Ildefonso Guajardo said Friday during a visit to Washington to talk NAFTA. "I have been very clear that in this context a quota on steel won't be the best way to go.”

If the tariffs do go ultimately into effect for any of the countries involved, a key question will be whether Trump will ratchet up the pressure again after the countries inevitably retaliate, Reinsch said.

“We act, they act, that’s round one. The question will be, is [Trump] then going to start round two?” he said, noting that one round of tit-for-tat is “not that unusual” but that two would be more remarkable. “I think the trade war starts in round two.”