Articles in Category: Public Policy

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This past Friday, the Office of the United States Trade Representative (USTR) released the list of Chinese goods targeted for an additional 25% tariff, marking a critical step in the Trump administration’s Section 301 probe that has investigated what it perceives to be unfair Chinese trade practices.

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“We must take strong defensive actions to protect America’s leadership in technology and innovation against the unprecedented threat posed by China’s theft of our intellectual property, the forced transfer of American technology, and its cyber attacks on our computer networks,” USTR Robert Lighthizer said in a prepared statement. “China’s government is aggressively working to undermine America’s high-tech industries and our economic leadership through unfair trade practices and industrial policies like ‘Made in China 2025.’

“Technology and innovation are America’s greatest economic assets and President Trump rightfully recognizes that if we want our country to have a prosperous future, we must take a stand now to uphold fair trade and protect American competitiveness.”

The announcement comes on the heels of three days of public hearings held last month by the USTR and the Section 301 Committee, during which 121 witnesses offered testimony. In addition, more than 3,200 written submissions were sent in relation to the probe, according to the USTR release.

What is Covered in the Tariff List?

The 25% tariff covers 1,102 products in two separate tariff lines.

The first set of products, according to the USTR, includes 818 products worth approximately $34 billion. Duties will be collected on these items beginning July 6. (The full list of products in this set is available here.)

Among the metal-related products included in this list are:

  • Furnaces and ovens for the roasting, melting or other heat treatment of ores, pyrites or of metals
  • Converters of a kind used in metallurgy or in metal foundries
  • Casting machines, of a kind used in metallurgy or in metal foundries
  • Metal-rolling tube mills
  • Machine tools operated by laser, for working metal
  • Tools for working in the hand, pneumatic, rotary type, suitable for metal working
  • Machines and mechanical appliances for treating metal, including electric wire coilwinders, nesoi
  • Molds for metal or metal carbides, injection or compression types

Meanwhile, the second set comprises 284 products “identified by the interagency Section 301 Committee as benefiting from Chinese industrial policies, including the ‘Made in China 2025’ industrial policy.” (The full list of products in this set is available here.) A review and comment period on this set is forthcoming and, subsequently, a final decision from the USTR on which of these products will be subjected to the additional duty.

The products in question cover a wide range of uses, including aerospace, information and communications technology, robotics, industrial machinery, new materials, and automobiles, according to the release.

The list, however, does not include common consumer purchases, like cellphones and televisions.

Last week, China indicated it would do away with trade deals made to date with the U.S. (done with the intention of scaling back burgeoning trade tensions). In addition, it said it would respond with retaliatory tariffs should the U.S. move forward with the Section 301 duties on Chinese goods.

The U.S. launched the Section 301 investigation in August 2017 in an attempt to investigate what are perceived as unfair Chinese trade practices, particularly with reference to intellectual property theft and forced technology transfers.

The Response at Home

Scott Paul, president of the Alliance for American Manufacturing, praised the USTR decision, but said additional steps must be taken to curb the impacts of China’s alleged unfair trade practices.

“For too long, American businesses and workers have suffered devastating losses due to China’s unchecked cheating,” Paul said in a prepared statement. “These targeted tariffs are the right thing to do for our workers, our economy, and our future.

“While we support the administration’s action today, there is still much left to be done. Restricting Chinese investment, pursuing multilateral trade cases against Beijing, and defending our farmers and workers who may be unfairly targeted by Chinese retaliation must also be priorities.”

Other industries, including the domestic textiles sector, expressed support for the move, while arguing textile end products should also be included on the list of items targeted for the additional duty.

“As per our recommendation, NCTO is pleased that almost all textile machinery products were removed from the final list of tariff lines subject to immediate 301 duties because tariffs on textile machinery hinder the competitiveness of U.S. textile manufacturers,” said Auggie Tantillo, president and CEO of the National Council of Textile Organizations.

“While appreciative of today’s actions, NCTO is convinced that the Trump administration’s efforts to deter China’s unfair trade practices would be even more effective if textile and apparel end products from China were made subject to Section 301 tariffs.”

The domestic boating industry, however, was critical of the announcement, as the tariff lines include marine engines, navigational equipment and other components important to the industry. According to a release from the National Marine Manufacturers Association (NMMA), the tariffs list includes nearly 300 marine industry products.

“The U.S. recreational boating industry – a $39 billion industry that supports 650,000 American jobs – faces another setback due to the Trump Administration’s actions on trade,” NMMA President Thom Dammrich said in a prepared statement. “Today’s announcement on Section 301 tariffs once again puts our proud, uniquely American-made industry at the mercy of bad trade policies that are piling up on top of each other. Collectively, these tariffs are causing the price of raw materials and marine parts to rise rapidly and stifling U.S. boat exports.

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“The 301 tariffs compound prior trade actions that are already harming the American recreational boating industry. From Section 232 and 301 tariffs, to countervailing and anti-dumping duties, our industry is under assault on multiple fronts. These actions are already upsetting global markets and hurting American consumers, businesses, and workers.”

The Auto Care Association was also critical of the Trump administration’s decision.

“The Auto Care Association supports the administration’s efforts to protect U.S. intellectual property, but regrets that the administration has neglected to evaluate the economic harm to the cost of repair and maintenance of the family autos and the unintended consequences of trade restrictions on the average American family,” a statement on the association’s website said.

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India’s new steel impetus has started to pay dividends, it would seem.

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The Government of India (GoI) has claimed that not only had the new policy saved it about $739 million (Rs 5000 crore) by way of foreign exchange, it had also helped it add around 24 million tons (MT) of crude steel capacity.

Steel Secretary Aruna Sharma told reporters that India had also replaced Japan as the second-largest steel producer this year. The new National Steel Policy (NSP) announced last year had upped the ante and set a new target of raising the capacity to 300 MT by 2030, and produce 250 MT of crude steel.

Sharma said there has been a massive forex saving after the policy was rolled out in May 2017. Steel production capacity itself had increased from 110 MT in 2014-15 to 134 MT in 2017-18, while 7 MT was added in 2017 alone.

In fact, in April this year, India’s crude steel production grew 4.4% to 8.59 MT, according to GoI data. India produced 8.22 MT during the same month a year ago, the Joint Plant Committee (JPC) said in a report. During April 2018, the output of hot metal was at 5.80 MT, as compared to 5.38 MT during April 2017.

Indian steel sector has been growing at a compounded annual growth rate (CAGR) of about 5% over the past four years on account of improvement in the overall capacity utilization, Sharma said. The GoI is hopeful that if the trend continues, the country’s steelmaking capacity would touch the expected 150 MT mark by 2020.

In 2017, India became a net exporter of steel, with exports of 8.2 MT registering 102% growth over the previous fiscal year. The exports from 5.6 MT in FY ’15 rose to 9.6 MT in FY ’18. On the other hand, the imports have declined by 36% from a level of 11.7 MT in FY 1’6 to 7.5 MT in FY ’18.

India has set a target of 300 MT of steel by 2020 and almost one-third of it alone would come from the province of Odisha in East India. Odisha is rich in raw materials needed for steel production, and has potential to produce 100 MT of steel.

About four years ago, India was fourth in global steel production behind to China, Japan and the U.S. Two months back, India’s position went up to second, moving past Japan. India’s crude steel production grew 4.4% to 8.59 MT during April 2018, according to official data.

Four years ago, the steel consumption per head in India was 58 kg. Today, it is 65 kg. The aim is to raise it to 107 kg by 2030.

On a slightly different note, Commerce Minister Suresh Prabhu was on a two-day visit of the U.S. starting June 10 to convince his counterparts that India was playing by the rules where steel and other tariffs were concerned.

Prabhu’s two-day trip to Washington included meetings with U.S. Commerce Secretary Wilbur Ross, U.S. Trade Representative Robert Lighthizer and National Economic Council Director Larry Kudlow. Prabhu’s objective was to try and get exemptions from the tariffs on steel and aluminum and save India’s benefits under the Generalized System of Preferences (GSP), which the Trump government has put under review.

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The GoI has submitted a public comment to the U.S. government in its defense before a June 19 hearing of the GSP subcommittee, which will review India’s eligibility and decide whether New Delhi was providing “equitable and reasonable” market access in exchange for GSP benefits.

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This morning in metals, the European Union has seen its level of imports surge in 2018, a Republican Senator has unveiled a bill that seeks to check the president’s authority on tariffs and the E.U. plans to impose tariffs on the U.S. next month.

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EUROFER Links U.S. Tariffs With Import Rise

In light of the U.S.’s decision to impose its aluminum and steel tariffs on the E.U. (after the deadline on the 28-member bloc’s temporary exemption came and went June 1), the European Steel Association (EUROFER) says the E.U.’s steel exports have jumped 8% this year, Reuters reported.

The association argues that the import surge is directly attributable to the redirecting of supplies into Europe (as a result of the U.S.’s Section 232 tariffs).

“The European steel industry condemns the US import tariffs on steel. This protectionist trade action is absurd – it hits the US’ own allies hardest,” said Geert Van Poelvoorde, president of EUROFER, in a release Thursday. “We also now expect to face a large loss of market share in the US, a market that accounts for 16% of EU exports.”

Corker Introduces Bill to Check President’s Tariff Authority

It has been a big year for tariffs in the world of metals, an arena in which the office of the president has quite a bit of power.

Sen. Bob Corker (R-Tenn.), however, has introduced a bill that would seek to limit the president’s power with respect to tariffs, the Washington Post reported.

According to the bill, the president would have to win congressional approval if he plans to enact tariffs on the grounds of national security, the Post reported.

E.U. Plans Retaliatory Tariffs

The E.U. will slap $3.3 billion in tariffs on U.S. goods next month, according to a CNN report.

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E.U. Trade Commissioner Cecilia Malmstrom called the U.S. steel and aluminum tariffs “unilateral and illegal,” according to the report.

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This morning in metals news, Mexico hits back against the U.S.; tariffs aren’t good for relationships with allies, the Aluminum Association’s CEO says; and the E.U. could impose steel and aluminum safeguard measures as early as July.

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Mexico Hits Back

Retaliation on the heels of the U.S.’s decision to allow for the expiration of the temporary tariff exemptions for the E.U., Canada and Mexico is something that was expected.

Mexico did just that, placing tariffs on steel products and farm products, according to an NPR report.

According to the report, the steel products on the list are steel plates, bars and rods, and rolled steel.

Tariffs Don’t Make Friends

The Aluminum Association, the industry group representing American aluminum, has consistently expressed over the last year that any trade remedies vis-a-vis aluminum should focus primarily on Chinese overcapacity and should not harm market-economy trading partners.

Heidi Brock, CEO of the Aluminum Association, told NPR’s Rachel Martin that the tariffs could alienate the U.S. from its allies.

“In our view, illegally subsidized Chinese overcapacity is the problem,” Brock told NPR. “Tariffs and quotas on market economies really, in our concern, would be ultimately alienating allies that we need to help us on that problem.”

Needless to say, based on rhetoric since June 1 from the E.U., Canada and Mexico, it seems like that alienation has already begun to take shape.

Meanwhile, in Europe…

Speaking of retaliation, the E.U. could be set to do just that in the near future.

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E.U. Trade Commissioner Cecilia Malmstrom told Reuters that steel and aluminum safeguard measures could be instituted next month.

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The U.S. Department of the Interior on Friday published a final list of minerals deemed “critical to the economic and national security of the United States.”

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According to a United States Geological Survey (USGS) announcement, the list will be the “initial focus of a multi-agency strategy due in August this year to implement President Donald J. Trump’s Executive Order to break America’s dependence on foreign minerals.”

Earlier this year, the Interior published a draft list of minerals and kicked off a window for public comment. After the public comment window closed — which saw submission of 453 comments — the Interior decided to finalize the original list.

“The expertise of the USGS is absolutely vital to reducing America’s vulnerability to disruptions in our supply of critical minerals,” said Dr. Tim Petty, assistant secretary of the Interior for Water and Science, in the prepared statement.

A Department of Commerce report is due to President Trump by Aug. 16. According to the USGS release, the report will include:

  • a strategy to reduce the nation’s reliance on critical minerals
  • the status of recycling technologies
  • alternatives to critical minerals
  • options for accessing critical minerals through trade with allies and partners
  • a plan for improvements to mapping the United States and its mineral resources
  • recommendations to streamline lease permitting and review processes,
  • ways to increase discovery, production, and domestic refining of critical minerals

The full list of minerals is as follows:

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This morning in metals news, the E.U. is reportedly getting ready for the U.S. Section 232 tariffs to go into effect, U.S. raw steel production was up last week and Rio Tinto asked the Mongolian government to fulfill contract stipulations related to the firm’s copper mining project in the country.

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E.U. Not Optimistic About Section 232 Exemption

According to an Associated Press report, the E.U. has expressed doubt that it will win a long-term exemption from the U.S.’s Section 232 steel and aluminum tariffs.

“There have been signals from the U.S. that the exemptions will not be prolonged. So either they will be imposed on us the first of June, or there will be other sorts of limiting measures,” E.U. Trade Commissioner Malmstrom was quoted as saying.

Steel Production Rises

U.S. raw steel production for the week ending May 19 was up 3.3% from the same week last year, according to the American Iron and Steel Institute (AISI).

Production for the week was also up 1.6% from the previous week ending May 12.

Rio Tinto Asks Mongolian Government to Fulfill Copper Mine Contracts

According to a Reuters report, Rio Tinto has asked the Mongolian government to honor contracts related to its copper mine project in the country.

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According to the report, the government has arrested officials on account of possible misuse of power related to the contracts for the Oyu Tolgoi mine.

Does your company strategy call for a European manufacturing base but you worry you have missed the boat in terms of accessing lower-cost opportunities created when eastern European countries like Poland and the Czech Republic came into the E.U.?

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Lower land and labour costs, aligned with ample financial support from the E.U. to the poorer parts of Europe created a fertile investment environment for new business growth in these eastern European states. With a good standard of education, generally good rule of law and a high work ethic, it is not surprising eastern Europe has gone through something of an industrial revolution over the last 20 years.

But for firms looking to set up in those markets now, they are the Johnny-come-latelies to a maturing investment environment.

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Read more

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This morning in metals news, South Korea has filed a complaint at the World Trade Organization (WTO) over the U.S. tariffs on washing machines and solar panels, turmoil in the aluminum market is high and copper prices dipped Monday.

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South Korea Goes to the WTO

South Korea has filed a complaint at the WTO over the U.S. tariffs on solar panels and washing machines, according to Reuters.

Aluminum Volatility

It’s been a bumpy couple of months for the aluminum market, as the U.S. Section 232 tariff on the metal and the announced sanctions Russian firms and their owners have combined to spark quite a bit of volatility.

Marco Palmieri, president of Novelis North America, pointed to the aforementioned items as the recent sources of uncertainty in the market during an interview with the Financial Times.

Copper Down, Lead Up

Copper prices dropped on account of rising stockpiles while lead continued to push away from its nine-month low, according to Reuters.

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LME copper dropped 0.7% while lead rose 1.5%, according to the report.

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This morning in metals news, every country exempted from the Trump administration’s Section 232 tariffs will be subject to either quotas or restrictions of some kind, copper hit a one-week high and aluminum prices jumped today as Trump administration officials kicked off a trip to Beijing to talk trade.

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Quotas and Restrictions for Exempted Countries

Peter Navarro, trade adviser to President Trump, said Thursday that every country that has received an exemption from the Section 232 tariffs on steel and aluminum will be subject to a quota or some kind of restrictions, Politico reported.

This week, the temporary exemptions for the E.U., Canada and Mexico, which were set to expire May 1, were extended 30 days.

Copper Rises to One-Week High

Copper prices hit a one-week high Thursday, Reuters reported.

LME copper rose 0.8% to hit $6,873 per ton, according to the report.

Aluminum on the Rise

As Trump administration officials began meetings in Beijing today with Chinese trade officials, the price of aluminum rose significantly, Business Insider reported.

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The aluminum price was up by over 3% Thursday, according to the report.

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This morning in metals news, the U.S. is considering quotas for the nations that had their Section 232 tariffs exemptions extended by 30 days this week, Russian aluminum giant Rusal could find its way out from under the eye of U.S. sanctions and the U.S. is hoping for a NAFTA deal this month.

Quotas for E.U., Canada, Mexico?

Earlier this week, the U.S. announced it had extended the deadline on temporary Section 232 tariffs exemptions for the E.U., Canada and Mexico.

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So, what happens now?

According to a Reuters report, the Trump administration is considering quotas and other restrictions.

The U.S. has already approved a 70% quota for South Korea, which was originally on the short-term exemption list but negotiated a long-term exemption with no tariffs.

Rusal and Sanctions

Russian firm Rusal could in fact end up avoiding the impact of U.S. sanctions, according to a MarketWatch report.

According to the report, En+ Group, the owner of Rusal, told the U.S. Treasury that oligarch Oleg Deripaska would reduce his role with the company, which was a condition for the U.S. in its previous announcement on the potential easing of the sanctions.

Lighthizer Wants a NAFTA Deal This Month

U.S. Trade Representative Robert Lighthizer said he wants to reach a deal on NAFTA sometime this month, Bloomberg reported.

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“We’re going to meet again on Monday, and we’ll see if we can get a good agreement,” Lighthizer said on Tuesday, as quoted by Bloomberg. “I’d like to get it done a week or two after that. If not, then you start having a problem.”