Trump expands Section 232 tariffs on steel, aluminum derivatives

Dmitry Adobe Stock tariff 032918
Dmitry/Adobe Stock

Late Friday, the Trump administration announced it would raise the Section 232 steel and aluminum tariffs, originally imposed in 2018, on imports of steel and aluminum derivatives.
Looking for metal price forecasting and data analysis in one easy-to-use platform? Inquire about MetalMiner Insights today!
“The Secretary has informed me that domestic steel producers’ capacity utilization has not stabilized for an extended period of time at or above the 80 percent capacity utilization level identified in his report as necessary to remove the threatened impairment of the national security,” President Donald Trump said in a White House statement Friday. “Stabilizing at that level is important to provide the industry with a reasonable expectation that market conditions will prevail long enough to justify the investment necessary to ramp up production to a sustainable and profitable level.”

The 25% tariff on imported steel and 10% tariff on aluminum, imposed via Section 232 of the Trade Expansion Act of 1962, will be raised for imports of steel and aluminum derivatives. The additional duties — an additional 10% for aluminum derivatives and an additional 25% for steel derivatives — will go into effect Feb. 8.
“These rates of duty, which are in addition to any other duties, fees, exactions, and charges applicable to such imported derivative aluminum articles or steel articles, shall apply to imports of derivative aluminum articles described in Annex I to this proclamation from all countries except Argentina, the Commonwealth of Australia (Australia), Canada, and the United Mexican States (Mexico) and to imports of derivative steel articles described in Annex II to this proclamation from all countries except Argentina, Australia, Brazil, Canada, Mexico, and South Korea,” the White House said.
Imports of steel and aluminum derivatives have surged in recent years, according to the White House.
For example, import volumes of steel nails, tacks, drawing pins, corrugated nails, staples, and similar derivative articles for the June 2018-May 2019 period rose 33% compared with the previous 12-month period.
Meanwhile, import volumes of aluminum derivatives increased by 152% during the aforementioned period.
In addition, import volumes of “bumper and body stampings of aluminum and steel for motor vehicles and tractors” increased by 38%, according to the White House.
“It is the Secretary’s assessment that foreign producers of these derivative articles have increased shipments of such articles to the United States to circumvent the duties on aluminum articles and steel articles imposed in Proclamation 9704 and Proclamation 9705, and that imports of these derivative articles threaten to undermine the actions taken to address the risk to the national security of the United States found in Proclamation 9704 and Proclamation 9705,” the statement continued. “As detailed in the Secretary’s reports, domestic production capacity to produce aluminum articles and steel articles for national defense and critical infrastructure is essential to United States national security.”
MetalMiner Executive Editor Lisa Reisman weighed in on the tariff announcement, zeroing in on the cost-benefit analysis manufacturers face when determining whether to manufacture something — like a steel nail — domestically versus sourcing the article from abroad.

“The demand has surged because domestic manufacturers are looking at ways to mitigate the original steel and aluminum 232 tariffs,” Reisman explained.
“To do that, instead of importing the steel or aluminum and face the 232 tariffs, manufacturers can opt to purchase a more ‘finished’ component that contains the underlying metal (and therefore avoid the tariff), assuming the finished component comes in at a lower total landed cost than the manufacturer producing that component domestically. Apparently, the answer to that question is that, yes, it was cheaper sourcing (i.e., buying) the more finished component than producing it in the U.S. with the higher-cost aluminum/steel.”

Keep up to date on everything going on in the world of trade and tariffs via MetalMiner’s Trade Resource Center.
Now, manufacturers have an added layer of complexity to consider when making their decisions.
“Now Trump will put a tariff on those downstream aluminum and steel components and manufacturers will make their next round of business decisions: should we purchase finished assemblies offshore, i.e. ‘buy,’ versus ‘make’?” Reisman continued. “This, to me, is the real essence of a trade war. I don’t think the president wants U.S. manufacturers to give up manufacturing the value-added components and assemblies here, but manufacturers will make those business decisions by examining their cost structures. They will ‘buy’ if it’s cheaper than ‘making.'”
Reisman cited a similar example with imports of grain-oriented electrical steel (GOES) after domestic producers won an anti-dumping ruling. In 2014, the Department of Commerce determined GOES had been dumped into the U.S. from Germany, Japan and Poland.
“Because the customers were large global multinationals like ABB, Siemens and/or middle market companies with operations in Canada/Mexico, such as Tempel Steel or Cogent, instead of making transformers in the U.S. using more expensive grain-oriented electrical steel, these manufacturers merely made the decision to produce the transformers in Mexico and Canada, still take advantage of cheaper global pricing for the steel while their U.S. divisions imported the more ‘finished’ product (under NAFTA and without having to pay the duty on the grain-oriented electrical steel),” Reisman noted.

One Comment

  • A.K. Steel in Butler, Pa. might shut down do to tarrifs loophole according to Mike Kelly if there is not an immediate change? Was a strong republican but not sure today 1500 employees will loose their jobs.


Leave a Reply

Your email address will not be published. Required fields are marked *

Scroll to Top