The Trump Administration’s Steel and Aluminum Tariffs

On March 1, 2018, President Trump announced new tariffs on steel and aluminum imports, rejecting push back from his own advisers and objections from both Democrats and Republicans.  Trump said the tariffs were needed to level the playing field for American steel producers against “bad actors” like China. The import tariffs included 25 percent on steel and 10 percent for aluminum. At the time of the announcement, the President exempted Canada and Mexico and offered the possibility of excluding other allies.

In the wake of the announcement, many countries threatened retaliation against any U.S. tariffs. The European Union threatened to impose tariffs on hundreds of U.S. items for import, including cigarettes, sweetcorn, and stainless steel sinks. However, those threats were not realized, as the U.S. carved out an exemption for the EU. To date, the U.S. has granted exemptions to key allies, including Canada, Mexico, the EU, Argentina, Australia, Brazil and South Korea.

India is seeking an exemption from the tariffs. The Trump Administration has taken issue with India in the past, since the U.S. has a $20 billion trade deficit there. On March 14, 2018, the U.S. challenged India’s export subsidy regime in the WTO. On April 11, 2018, the U.S. and India will hold bilateral consultations in Geneva to discuss the WTO case filed by the Trump Administration.

On March 18, 2018, the U.S. Department of Commerce formally announced procedures for excluding tariffs on steel and aluminum product imports for domestic companies. These procedures are aimed to minimize the impact on downstream American industries. A domestic company must apply for exclusions, and will be granted an exemption only sparingly and based on national security concerns, which the Bureau of Industry and Security will oversee. Certain considerations must be met in order to be excluding from the tariffs, including whether a product is produced in the U.S. and if the product is of a satisfactory quality or in a sufficient and reasonable amount.

On April 10. 2018, China filed a trade case at the WTO over President Trump’s steel and aluminum tariffs. China, which has requested 60 days of consultations with the U.S., argues that the tariffs are inconsistent with WTO rules and has said that the U.S. imposed the duties as a safeguard measure that countries use to counter export restrictions by other nations. China’s complaint argues that the U.S. hasn’t shown that steel and aluminum imports hurt domestic producers and it hasn’t followed the proper procedures in pursuing the tariffs. China’s government issued a $3 billion list of U.S. goods, including pork, apples and steel pipes that it said might be targeted for retaliation if Trump fails to negotiate a settlement to the dispute over steel and aluminum charge.

Trump has threatened to increase duties on $50 billion in Chinese goods in a separate conflict over technology policy. On March 23, 2018, the Office of the U.S. Trade Representative launched a complaint, stating that China uses discriminatory licensing requirements to compel the transfer of technologies from U.S. companies to Chinese firms. Since that time, Japan has notified the WTO of its intention to join as a third party in the U.S.’s complaint against China over alleged theft of intellectual property. After China threatened retaliatory import duties on $50 billion in U.S. goods, including soybeans, Trump suggested he might seek tariffs on $100 billion more in Chinese goods. In response, Chinese President Xi Jinping had said China would unilaterally open its markets and cut tariffs on auto imports and lower trade barriers on other goods and services.

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US and South Korea Reach Trade Deal

On March 28, 2018 the White House formally announced that a trade deal with South Korea had been reached. President Trump is claiming a major victory with this one-on-one deal, the first of its kind since he took office, as he has always made clear he does not like multinational trade agreements. The deal includes measures to benefit the American car companies, including lifting existing limits on American car manufacturers, doubling the number of vehicles the U.S. can export to South Korea, and keeping Korean pickup trucks out of the U.S. The agreement includes language to ensure neither country devalues their currency intentionally and creates more transparency on the issue of monetary policy, another important issue for President Trump. The new deal also exempts South Korea from the steel tariffs that were announced by the Trump Administration earlier this month. Trump has also carved out exemptions for other U.S. allies, including the EU, Mexico and Canada. South Korea will still be subject to the 10% tariff that was imposed on aluminum.

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Trump Annouces Tariffs on Steel and Aluminum

President Trump announced he will impose tariffs on imported steel and aluminum to protect U.S. producers. Trump said the tariffs would include a 25% duty on foreign steel and 10% for aluminum. While there has not been an Executive Order or formal announcement from the White House yet, Trump said one would be issued next week. This announcement was criticized by Republican and Democratic lawmakers, as well as industries such as automakers, oil, construction, and farmers, who fear retaliation by steel-exporting countries. Already, countries from around the world, including Canada, China and EU member states, have stated they will retaliate in kind if these tariffs go into effect. The EU Commission President has stated that if the U.S. follows through with the tariffs, the EU would retaliate against the sanctions with tariffs of its own. China has stated it will curb U.S. agricultural imports as well as issue retaliatory tariffs. Canada is the largest source for U.S. steel and Prime Minister Justin Trudeau called the tariffs “unacceptable” and stated he would retaliate as well. This tariff announcement comes at a time when the U.S., Canada and Mexico are re-negotiating NAFTA, and private sectors in Canada are calling on the Prime Minister to walk away from the talks if the tariffs are formalized.

 

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Another Round of NAFTA Talks Begin

On Sunday, U.S., Canadian, and Mexican negotiators began a seventh round of North American Free Trade Association (NAFTA) re-negotiations in Mexico City. However, once again, trade talks are strained due to tensions between President Trump and Mexican President Pena Nieto and discussions surrounding a Southern border wall between the U.S. and Mexico. Mexico has not directly indicated it is walking away from negotiations. However, there are signs that Mexico is turning to other countries for trade, including Brazil. Last year, Mexico imported ten times more corn from Brazil than years past. U.S. farmers are the ones that will feel the effect of trade going elsewhere – not only corn – but also soybeans, dairy and poultry. Canadian President Trudeau has indicated that Canada is willing to walk away from NAFTA if negotiations fall apart; he said Canada won’t be accepting “any old deal.” These negotiation talks are schedule to run through March 5, 2018. There is no firm timeline for when a re-negotiation deal must be reached among the three countries, but there are political events that may delay and shape further talks, including a Mexican presidential election in July and the U.S. Congressional mid-term elections in November.

 

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What the EU’s New Data Regulations Mean for the US

On May 25, 2018, the European Union’s General Data Protection Regulation (GDPR) goes into effect. The GDPR was adopted in April 2016, and designed to protect the privacy rights of EU individuals through enhanced personal data protection. The GDPR sets new obligations and expectations regarding personal data. A key principle of the new regulation is that the ownership of personal data remains with the individual and not with companies. The rules don’t just affect the EU, but applies to all firms processing or controlling the personal information of EU residents, regardless of where those companies are located. The GDPR applies to all online interactions with EU citizens, no matter where the business is taking place.

US firms should be working on implementing the necessary technologies, policies, and procedures to ensure compliance by May. Depending on the size of the firm, these changes can be expensive and daunting, as many companies will have to build new structures into their systems and databases. The regulations include enhanced requirements regarding consumer consent, 72-hour breach reporting, and the “right to be forgotten” – meaning the right to request removal of personal data that they have posted online in the past. The GDPR also requires companies to maintain extensive records of personal data. Firms will need to store this information and turn over these records when requested, otherwise they could be subject to steep penalties. Fines for violations can reach up to 20 million Euros or 4 percent of a firm’s global annual revenue, per violation, whichever is larger. The GDPR governing body will have a lot of freedom in assessing fines for data breaches and non-compliance, as the GDPR leaves much to interpretation.

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Trump Announces New Tariffs Aimed at China and South Korea

On January 22, 2018, President Trump announced new tariffs on imports of solar panels and washing machines. The companies that will be most affected are from just two countries – China and South Korea. Trump has often complained that China and South Korea have unfair trade advantages over the U.S. There are fears of a possible backlash against the new tariffs, as China and South Korea import American-made machinery and agricultural products, and could punish the U.S. by opting to buy from non-American international competitors. There is also a concern that these tariffs will affect U.S. solar energy jobs and increase customer costs.

 China may be cautious in applying their own tariffs on U.S. goods, as they export about four times more to the U.S. than the U.S. exports to China. This may just be the beginning as President Trump has stated he would like to issue further tariffs on aluminum and steel imports from China, as well as to address further trade action focusing on intellectual property. South Korea said it will file a complaint with the World Trade Organization (WTO). However, there is uncertainty whether the Trump Administration would accept a decision by the WTO, as the U.S. Trade Representative, Robert Lightizer, has previously questioned whether WTO decisions should be binding on the U.S. The new tariffs may also affect current talks with South Korea, as the U.S. is currently renegotiating a free trade agreement with them.

 The day after Trump’s decision on new tariffs, a group of 11 countries – including Canada and Mexico – announced they have a deal for a revived Trans-Pacific Partnership (TPP), the trade agreement Trump pulled the U.S. out of as one of his first actions as President. The new deal is called the CPTPP, which stands for the Comprehensive and Progressive Trans-Pacific Partnership. Under the CPTPP, companies will have access to 500 million people with an estimated combined GDP of $10 trillion. The countries hope to sign the agreement by the end of the year.  The tariff announcement also came a day before the start of the sixth round of North American Free Trade Agreement (NAFTA) talks.

 

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NAFTA Renegotiations and Agriculture

On January 8, 2018, President Donald Trump spoke at the American Farm Bureau Federation’s annual conference. During his speech, President Trump said his administration is working on negotiating a good deal for farmers in the North American Free Trade Agreement (NAFTA), but did not go into the details. The agriculture industry is very concerned with the Trump Administration’s renegotiation of NAFTA and do not want to see the President pull out of the agreement altogether, like he has recently threatened. Many people in the agriculture industry believe NAFTA has been a success to date and did not want to see the agreement reopened in the first place. However, there are some updates that the agriculture industry would like to see in this renegotiation, including access to Canada’s dairy industry, which has been a closed market. The U.S. Department of Agriculture Secretary, Sony Perdue, has put forward a number of agricultural proposals for NAFTA, including dairy and poultry tariffs in Canada. The renegotiations have been strained for several months, after Canadian and Mexican officials rejected U.S. demands. The sixth round of renegotiations for NAFTA are scheduled to begin January 23, 2018 in Montreal, Quebec.

 

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New Russian Sanctions Deadline Looms in January 2018

On August 2, 2017, President Trump signed a bipartisan bill entitled, “Countering America’s Adversaries Through Sanctions Act” that placed sanctions against Russia, Iran and North Korea. The legislation was largely in response to Russia’s interference in the 2016 presidential elections. The bill calls for sanctions against people and entities that: undermine U.S. cybersecurity on behalf of the Russian government; invest in Russia’s energy export pipelines; conduct “significant” transactions with Russian defense and intelligence agencies; commit or assist in serious human rights abuses; commit acts of “significant” corruption; provide support to the Syrian government to acquire arms; and invest or facilitate the investment of $10 million or more in the Russian government’s privatization of any state-owned asset in a one year period that could unfairly benefit government officials or their associates. The bill lists a dozen types of sanctions that can be imposed against Russia by the president, including freezing assets, revoking U.S. visas, and banning exports form the U.S. to those sanctioned.

 The Sanctions Act instructed the Trump Administration to issue guidance on which Russian entities in the military and intelligence sectors should be sanctioned. This was supposed to be completed by October 1, 2017, however the administration missed this deadline, and did not issue it until October 26, 2017. The next deadline is January 29, 2018, when the administration must provide a list of businesses and enterprises from different countries that have continued to do business with those Russian entities and which will face sanctions as a result. When the October deadline was missed, the Senate Armed Services Committee, chaired by Senator John McCain (R-AZ), pressed the White House. However, Congress is not able to directly enforce the law, and there appears to be little they can do to force President Trump to act.

 On December 20, 2017, the Trump Administration imposed sanctions on five Russian individuals for alleged human rights abuses and involvement in criminal conspiracies. These sanctions were designated by the U.S. Treasury Department under the authority of the 2012 Magnitsky Act, a law that freezes any assets held in the U.S. of Russian officials responsible for human rights abuses, and also bars them from receiving visas.

 

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Trump Administration Ramps up Sanctions on North Korea

On November 21, 2017, the U.S. Department of Treasury issued more sanctions against North Korea in an effort to intensify pressure on Kim Jong Un and his regime. These sanctions are targeted to one individual – a Chinese businessman, 13 companies, and 20 vessels that have all engaged in trade with North Korea. Treasure Secretary, Steven Mnuchin, said the latest sanctions targeted companies engaged in hundreds of millions of dollars of trade with North Korea. The Trump Administration also called on other countries around the world to put diplomatic and economic pressure on the North Korean regime. 

These sanctions came a day after President Trump declared he was placing North Korea on the list of state sponsors of terrorism. Trump stated this was a needed move, especially because North Korea has “repeatedly” sponsored acts of terrorism, including “assassinations on foreign soil.” North Korea had previously been removed from the list in 2008, by then President George W. Bush. Currently, there are only three other countries in the world with this label, including Iran, Sudan and Syria. Secretary of State, Rex Tillerson said that the move to designate North Korea as a state sponsor of terrorism was largely a symbolic one. The Trump Administration has indicated there are still more sanctions and actions to come against North Korea in the coming weeks. 

 

 

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NAFTA Talks Will Continue Into 2018

The time frame for the North American Free Trade Agreement (NAFTA) renegotiation talks has been extended and will now continue into 2018. The fourth round of talks between the U.S., Canada and Mexico took place October 11-17. These talks faced significant issues and top NAFTA officials are pushing back against recent U.S. proposals.

One of these U.S. proposals is the controversial change for the way cars are made – currently a rule requires that at least 62% of the parts of a car sold in North America come from the region to avoid import taxes. The Trump Administration is now pushing for an 85% threshold, with 50% requirement of U.S. specific content.

Other contentious U.S. proposals include doing away with dispute-resolution mechanisms that currently limit how the U.S. can retaliate against its trading partners; revisions to intellectual property requirements; new protections for U.S. seasonal produce growers; and adding a “sunset clause” under which NAFTA would have to be re-approved every five years or end. These proposals have been viewed as “non-starters” and some question if this is an attempt by the Trump Administration to undermine the negotiations with “poison-pill” proposals.

The fifth round of talks is scheduled to begin in Mexico City on November 17, 2017. When the NAFTA talks first began in August of 2017, there was a soft deadline to have the deal completed by the end of 2017. President Trump has said he will scrap the trade deal altogether if the countries cannot reach an agreement on revising NAFTA. However, U.S. Trade Representative (USTR) Robert Lighthizer has said the U.S. is not taking active steps to withdraw from NAFTA at this time.

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About Beyond Borders
In a world of growing global interdependence, laws are transcending borders and increasingly affecting international business. Thus, making significant developments in the international community of utmost importance. Cozen O’Connor’s international business law blog, Beyond Borders: An International Business Blog, focuses on topics, trends and laws impacting the international business community.
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