Trump hoping to use his steel tariff plan as a global bargaining chip

The order marked the first time in more than three decades that a U.S. president has invoked national security as the basis for ordering such trade restrictions.

By Don LeeStaff Writer

March 8, 2018 4:50 PM PT

Reporting from Washington — President Trump’s final order to slap sweeping tariffs on imported steel and aluminum looks less like an effort to preserve national security and more like an attempt to create a giant bargaining chip that the president can play around the world.

A week after haphazardly announcing across-the-board tariffs on imported metals, Trump on Thursday signed orders that would impose duties of 25% on foreign steel and 10% on aluminum. The levies take effect in 15 days.

In doing so, the president swept aside a flurry of warnings from ally nations, companies and lawmakers from his own party, who worry Trump’s actions will ignite a dangerous trade war that costs more American jobs than it saves.

The final decrees retreated sharply from the blanket tariffs Trump spoke of just a week ago. He exempted — at least temporarily — Canada and Mexico from the duties, and opened the door for virtually every other country to also avoid them — provided they offer a “satisfactory alternative,” according to the orders.

Exactly what might be acceptable as an alternative wasn’t spelled out and Trump stressed that “we’re going to be very flexible.” His criteria appeared subjective.

“We’re going to see who’s treating us fairly, who’s not treating us fairly,” Trump said. He then invited trading partners who want to avert the new tariffs to make their case to his chief trade official, Robert Lighthizer. Part of the consideration, he said, “is going to be military. Who’s paying the bills, who’s not paying the bills.”

Trump suggested that Canada and Mexico could make their exemption permanent by agreeing to U.S. demands in the renegotiation of the North American Free Trade Agreement. So far the two trading partners in the 24-year-old pact have flatly rejected Trump’s effort to link the two issues.

“The negotiation process for the modernization of NAFTA will follow its course independently of this or any domestic policy measure taken by the United States government,” Mexico’s Finance Ministry said Thursday in a statement.

Trump and administration officials said other factors that would be considered for exemption from the tariffs could include reducing a bilateral trade deficit with the U.S. or coughing up more money for joint international security expenses. China, Trump noted, is currently discussing ways to reduce its overall trade surplus with the U.S.

While Trump has often cast himself as a deal maker, it’s far from clear whether his strategy will work or how other nations will respond.

The European Union and other trading partners of the U.S. will be reluctant to make concessions to placate Trump to get off the hook on the new tariffs. On the other hand, responding with a tit-for-tat manner could escalate trade conflicts that would hurt everybody in the long run.

Trump signaled that the White House is open to any and all offers, apparently in an effort to show flexibility to ease the concerns of his fellow conservatives. Republicans and businesspeople have long championed free trade, and earlier this week, Trump’s top economic advisor, Gary Cohn, resigned after losing an internal battle with nationalists in the administration over the tariffs.

But Trump now risks weakening the legal argument that the protections are needed for national security or to help the U.S. steel and aluminum industries.

And the chaotic rollout of the tariffs, lack of details and the uncertain process that lies ahead could mean that the plan — like so many other Trump programs — finds itself tied up in legal challenges.

In making his boldest use of presidential trading power to date, Trump invoked a U.S. law that allows the president to restrict trade on the basis of national security, the first time in more than three decades that that rationale has been invoked to implement protectionist measures to shield a domestic industry from import competition.

Standing in front of 10 steelworkers in factory uniforms on Thursday, Trump emphasized the importance of steel and aluminum to America’s defense industry. “You don’t have steel, you don’t have a country.”

But in exempting Canada and Mexico — and leaving wiggle room for other countries to get tariff waivers as well — Trump has undercut his own claim that the duties are necessary to protect national security, said James Bacchus, a former House lawmaker and ex-chairman of the appellate body of the World Trade Organization.

“This is looking less and less like a national security measure and more and more like economic pressure,” Bacchus said, noting that the cherry-picking of countries to exclude was a clear violation of WTO rules. He and other experts expect Trump’s tariff orders to be challenged at the WTO.

The U.S. also could be hit with retaliatory tariffs. In anticipation of the tariff orders, EU leaders earlier in the week endorsed a plan to target for countertariffs items such as American steel, chewing tobacco and orange juice. EU members such as Germany and the United Kingdom export hundreds of millions of dollars of steel to the U.S.

Canada is the largest American source of foreign steel and aluminum, and Mexico is among the top five, as metals from both countries are shipped across North American borders for production of things such as cars and appliances. South Korea and Japan, as well as North Atlantic Treaty Organization member Turkey, also stand to be among the biggest losers if the tariffs take effect.

China is the world’s largest manufacturer and exporter of steel and aluminum, and has been blamed for overproducing metals that have created a global glut and indirectly hurt the U.S. industry and jobs. But because of many prior U.S. tariff measures on individual steel products, China accounts for only about 2.5% of U.S. imports of steel.

For that reason, U.S. business interests, GOP lawmakers and manufacturing groups pressed Trump not to issue blanket tariffs. Instead, they urged Trump to take actions that could address that root problem or target China and other select nations that the Trump administration says are buying Chinese steel and selling to the United States.

After Trump issued the tariff decrees, Sen. Lamar Alexander (R-Tenn.) said he was heartened by the president’s insistence that he would be flexible in invoking tariffs. “I’m encouraged,’’ Alexander said, although he has warned that the tariffs would cost jobs in his state.

Other Republicans were far less diplomatic.

“These so-called ‘flexible tariffs’ are a marriage of two lethal poisons to economic growth — protectionism and uncertainty,” said Sen. Jeff Flake (R-Ariz.). Sen. Ben Sasse (R-Neb.) called it “a really stupid policy,” saying: “It’s going to hurt American consumers and it’s going to hurt American workers.”

Despite the vocal opposition, it was doubtful whether Congress would attempt to block Trump’s orders. Some Democrats supported the tariffs as helpful to American workers. “I’m glad we are finally standing up for ourselves,” said West Virginia Sen. Joe Manchin.

Trump won the presidency in part on the promise to strengthen American industry.

Although the tariffs will help domestic producers, at least for awhile, economists and other U.S. businesses that use imported steel said that the tariffs would drive up metal prices, hurt consumers and ultimately lead to net job losses for Americans.

Staff writers Cathleen Decker in Washington and Kate Linthicum in Mexico contributed to this report.

[email protected]

Twitter: @dleelatimes

UPDATES:

4:5o p.m.: This article was updated with additional reaction from lawmakers and trade experts.

1 p.m.: This article was updated with Trump signing the orders.

12:30 p.m.: This article was updated with details about the tariff orders.

This article was originally published at 5:45 a.m.