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Rising trade tensions are all the talk these days, stemming from an increasingly complicated web of tariffs, counter-tariffs and World Trade Organization (WTO) disputes, not to mention the ongoing talks surrounding renegotiation of the 24-year-old North American Free Trade Agreement (NAFTA).

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On Wednesday, Secretary of Commerce Wilbur Ross testified before the Senate Finance Committee, during which he was grilled by committee members on the Trump administration’s current and proposed trade actions, including Section 232 steel and aluminum tariffs, the recently launched Section 232 automotive probe and the Section 232 exclusion request process. (The Department of Commerce this week announced it would grant 42 exclusion requests and deny 56. The total 98 requests in question represented less than 1% of the more than 20,000 requests received.)

The full video of the Wednesday hearing is available on the Senate Finance Committee website.

“Commerce has received more than 20,000 steel and aluminum exclusion requests (including resubmissions) and has posted more than 9,200 for public review and comment,” Ross said during his opening statement. “Commerce has also received more than 2,300 objections to exclusion requests. Review of exclusion requests and related objections is being conducted on a case-by-case basis in a fair and transparent process.”

In his opening statement, Senate Finance Committee Chairman Orrin Hatch (R-Utah) expressed concerns about the tariffs’ impact on domestic businesses.

“American manufacturers are already suffering the consequences of increased cost and decreased supply of steel and aluminum inputs,” Hatch said. “Take for example, Bish’s Steel Fabrication. Bish’s makes custom industrial equipment in my hometown, Salt Lake City, Utah, and sells to customers in the United States and around the globe. Bish’s has been in business since 1945, but because of the Section 232 tariffs, they are worried about their future. Steel prices are going up. Not just foreign steel subject to tariffs, but also U.S. steel.

“As a consequence, Bish’s has lost its competitive edge against foreign manufacturers and the company tells me that contracts for future work have all but dried up.”

Questions on the 232 Exclusion Process

Hatch also expressed reservations regarding the Section 232 tariff exclusion process.

“It should come as no surprise that many of us on the committee have concerns about the process, effects, and strategy behind these investigations and resulting actions,” he said. “That includes the serious problems that Senator Wyden and I raised in April about the product exclusion process, a process that still needs significant improvement.”

Ranking Member Ron Wyden (D-Oregon) also offered criticism of the process and its efficacy, and requested that Ross provide a specific timetable with specific fixes for the process so that “the small businesses and the workers who are contacting us can really have a sense of what’s going to happen.”

“It’s impossible to commit to a specific timetable when we don’t know how many requests are yet to come in,” Ross said. “That’s one big problem. As you can see, there are still requests coming in.”

Wyden, however, suggested the Department of Commerce was not prepared for the volume of requests that have come in.

Section 232 Auto Probe

On May 23, the Department of Commerce self-initiated a new Section 232 investigation into whether imports of automobiles and automotive parts threaten to impair the country’s national security.

In response to a question from Hatch regarding national security implications, Ross responded that it was still too early in the investigation to identify those factors. He added that as required by the law, he has sent a notification to Secretary of Defense James Mattis to seek his input on the investigation, as was done with the steel and aluminum cases.

In response to a later question from Sen. Chuck Grassley (R-Iowa), Ross added there is no decision yet as to whether to recommend tariffs.

“We are at the early stages of the process,” Ross said. “We have invited the various participants in the industry to make their submissions. They requested some extra time, so we gave them an extra week to do so.”

Production Restarts

In his opening statement, Ross argued for a positive effect of the tariffs, that being domestic manufacturers restarting previously idled capacity, listing a number of company announcements (including U.S. Steel’s announcements this year that it will restart two blast furnaces at its Granite City, Illinois plant).

Grassley asked Ross how long it will take for domestic plants to be able to ramp up production enough to bring prices of steel back down. Ross said he couldn’t identify exactly when the production restarts would come to fruition, but that they should happen in most cases by the end of the year.

He added, however, that certain “intermediary parties” withholding inventory from the market has contributed to price increases and that an investigation is being started to determine whether people “illegitimately are profiteering out of the tariffs.”

“So the price of steel and for a while the price of aluminum went up far more than is justified by the tariffs,” Ross said.

Canadian Steel

The Trump administration’s announcement late last month that it would let temporary exemptions from the Section 232 steel and aluminum tariffs expire for the E.U., Canada and Mexico have led to threats of retaliation from the intended parties and questions from some domestically about the purpose of such tariffs against market-economy trading partners and allies.

Sen. Michael Bennet (D-Colorado) asked Ross about Canada and how its steel industry is considered a threat to national security in the context of Section 232.

“What is the national security rationale for putting a tariff on the Canadian steel industry with whom we have a trade surplus?” Bennet asked.

Ross noted the remedy has to be a global solution, citing efforts by China, for example, to reroute exports through third-party countries in order to avoid tariffs.

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“The only way we’re going to solve the global steel overproduction and overcapacity [problem] is by getting all the other countries to play ball with us,” Ross said. “And while they’re complaining bitterly about the tariffs, the fact is they’re starting to take the kind of action, which if they had taken sooner, would have prevented this crisis.”

Sen. Pat Toomey (R-Pennsylvania), however, was not satisfied with Ross’ answer.

“What policy change would the Canadians have to make, what would they have to do so that the administration would stop taxing my constituents on the steel that they buy from Canada?” Toomey asked.

Ross suggested breakdown of talks on NAFTA contributed to the decision to lift the Section 232 exemptions for Canada and Mexico, and that the NAFTA talks could get a second wind on the heels of the July 1 Mexican presidential election.

“Our objective is to have a revitalized NAFTA, a NAFTA that helps America,” Ross said. “As part of that, the 232s would logically go away, both as it related to Canada [and] Mexico.”

Toomey followed up by arguing the proposed sunset clause suggested by the American negotiating team would lead to a “lesser” NAFTA and said the administration’s trade actions are based on “economic nationalism,” not national security considerations.

He also alluded to the recent bill he proposed along with Sen. Bob Corker (R-Tennessee), a bill which calls for giving Congress the authority to block the president’s tariff actions.

“I would urge my colleagues to support the legislation that Sen. Corker and I have, which would restore to Congress the authority to make the final decisions about the imposition of those tariffs.”

Sen. Rob Portman (R-Ohio) said he supported enacting trade remedies in the case of China, but that Section 232 should be used “very carefully and very selectively” and, more specifically, for national security reasons.

“Although the WTO has not yet adjudicated this case, if we’re pushing the envelope beyond national security, I think we lose a tool that could be very important for us in a true national security situation,” he said. “[I’m] deeply concerned about its application to Canada, as an example. … Mexico, the E.U., I don’t see the national security perspective there.”

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This morning in metals news, JSW Steel USA announces it will add 1,000 jobs, India announces retaliatory tariffs in response to the U.S. steel tariff and aluminum tariffs, and the copper price fell for a second straight week.

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JSW Announces New Jobs

JSW Steel USA announced it would be investing $1 billion in two locations and hiring 1,000 jobs in the process, CNBC reported.

The firm announced the investment would be in Mingo Junction, Ohio, and Baytown, Texas. CEO John Hritz credited the Trump administration’s Section 232 tariffs for helping the company to expand, according to the report.

India Strikes Back at U.S. Tariffs

The U.S. steel and aluminum tariffs unsurprisingly sparked off a series of announcements from around the world regarding intentions by other countries to retaliate.

India is the latest country to join the list, announcing its intended regimen of retaliatory tariffs this week. According to the Financial Times, India has identified $240 million in U.S. goods to be targeted for tariffs, including chickpeas, walnuts, almonds and lentils.

Copper Falls Again

The copper price fell for the second straight week, Reuters reported.

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The LME price fell 3.1% this week, while Shanghai copper fell 3.3%, according to the report.

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The European Union announced Wednesday that it will impose duties on a list of U.S. products, worth approximately €2.8 billion, in response to the U.S.’s steel and aluminum tariffs. The 25% duty will go into effect Friday, June 22.

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The U.S.’s 25% duty on steel imports and 10% duty on aluminum imports went into effect after the U.S. announced at the end of May that it would not continue the temporary exemptions from the tariffs for the E.U., Canada and Mexico.

The list of U.S. products that will be subjected to the tariffs includes steel and aluminum products, in addition to agricultural goods and a “combination of other various products.” Other products subject to the duty include bourbon, motorcycles and orange juice. (A full list of the products is available here.)

“By putting these duties in place the EU is exercising its rights under the World Trade Organisation (WTO) rules,” a release on the European Commission’s website states.

Echoing previous comments, E.U. Trade Commissioner Cecilia Malmstrom alluded to the rules of international trade in justification of the move.

“We did not want to be in this position,” Malmstrom said in a prepared statement. “However, the unilateral and unjustified decision of the US to impose steel and aluminium tariffs on the EU means that we are left with no other choice. The rules of international trade, which we have developed over the years hand in hand with our American partners, cannot be violated without a reaction from our side. Our response is measured, proportionate and fully in line with WTO rules. Needless to say, if the US removes its tariffs, our measures will also be removed.”

The E.U. duties on U.S. goods will be “effective for as long as the US measures are in place, in line with the WTO Safeguards Agreement and EU legislation,” according to the release.

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“The EU will rebalance bilateral trade with the US taking as a basis the value of its steel and aluminium exports affected by the US measures,” the statement continues. “Those are worth €6.4 billion. Of this amount, the EU will rebalance on €2.8 billion worth of exports immediately. The remaining rebalancing on trade valued at €3.6 billion will take place at a later stage – in three years’ time or after a positive finding in WTO dispute settlement if that should come sooner.”

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This morning in metals news, the U.S. released the first round of exclusion request responses vis-a-vis the Section 232 steel tariff, copper bounces back and ThyssenKrupp looks to form a joint venture in China.

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Exclusion Time

The U.S. Department of Commerce announced Wednesday evening that it had begun granting Section 232 exclusion requests.

“This first set of exclusions confirm what we have said from the beginning – that we are taking a balanced approach that accounts for the needs of downstream industries while also recognizing the threatened impairment of our national security caused by imports,” Commerce Secretary Wilbur Ross said in a prepared statement.
The DOC announced it had decided to grant 42 exclusions. The seven requesting companies import steel products from Japan, Sweden, Belgium, Germany and China, according to the DOC release.
The seven companies receiving the exclusions are:
  • Schick Manufacturing, Inc. of Shelton, Connecticut
  • Nachi America Inc. of Greenwood, Indiana
  • Hankev International of Buena Park, California
  • Zapp Precision Wire of Summerville, South Carolina
  • U.S. Leakless, Inc. of Athens, Alabama
  • Woodings Industrial Corporation of Mars, Pennsylvania
  • PolyVision Corporation of Atlanta, Georgia

In addition, the DOC said it would be denying 56 steel tariff exclusion requests from 11 different companies.

Copper Moves Away From Three-Week Low

The price of copper recovered on the heels of hitting a three-week low, as measures by the Chinese government could work to augment demand in the country, Reuters reported.

Three-month LME copper moved up 0.4% on Thursday, according to the report.

ThyssenKrupp JV in China

German firm ThyssenKrupp — which has been in the news of late in the context of its joint venture plans with Tata Steel — has plans to team up with two companies to produce steel wheels in China, according to Reuters.

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ThyssenKrupp would enter a JV with Zhejiang Jingu and Ansteel, according to the report, with the German firm owning 34% of the JV.

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In a letter dated June 18 to Canadian Prime Minister Justin Trudeau, Canadian Chamber of Commerce CEO and President Perrin Beatty — along with nine heads of provincial Chambers of Commerce — wrote to express “support for the government’s efforts to defend Canadian interests in the face of unprecedented trade actions by the United States government.”

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The U.S. announced May 31 that it would impose its Section 232 steel and aluminum tariffs on Canada (as well as Mexico and the European Union), ending the temporary exemption for the country from the duties.

Canada was the world’s 19th-largest steel exporter last year. In 2017, 90% of Canada’s steel exports went to the U.S. (the second-largest export market, Mexico, came in at 7%).

“We fully support the government’s firm position that steel and aluminum exports from Canada do not pose a national security threat to the U.S. Our members are on the front lines of the cross-border supply chains that help drive the Canadian and American economies and support mutual national security through our joint defence industrial base,” the letter reads.

In the letter, Beatty supported the “dismantling of trade barriers,” while arguing the U.S. tariffs have forced Canada’s hand.

“However, the American government’s actions leave our country no choice but to respond in a fashion designed to encourage the withdrawal of U.S. steel and aluminum tariffs at the earliest possible opportunity,” the letter reads. “We urge the government to maintain an open dialogue with Canadian businesses to ensure that any unintended consequences for companies and workers are mitigated, particularly in those sectors that are most trade-dependent.”

According to U.S. Census Bureau data, the U.S. had a $4.55 billion deficit in goods with Canada through the first four months of 2018. The U.S. had a $17.05 billion deficit with Canada in 2017.

“Despite the unprecedented environment created by the U.S. government’s actions, we fully support the government’s continued efforts to achieve a modernized North American Free Trade Agreement,” the letter concludes. “Canadian negotiators should remain at the table and not allow the illegal and unjustified U.S. steel and aluminum tariffs to derail negotiations for an agreement that meets 21st century business needs.”

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The other signatories to the letter, all presidents of their respective Chambers of Commerce, were (province in parentheses): Ken Kolby (Alberta), Trevor Wever (Northwest Territories), Sheri Somerville (Atlantic), Rocco Rossi (Ontario), Val Litwin (British Columbia), Steve McLellan (Saskatchewan), Stephane Forget (Quebec), Peter Merrick Turner (Yukon) and Chuck Davidson (Manitoba).

Speaking of Chambers of Commerce, the U.S. Chamber of Commerce last week panned the U.S. announcement on tariffs to be placed on Chinese imports.

“Imposing tariffs places the cost of China’s unfair trade practices squarely on the shoulders of American consumers, manufacturers, farmers, and ranchers,” U.S. Chamber of Commerce President and CEO Thomas J. Donohue said in a prepared statement on the Chamber’s website. “This is not the right approach.”

Source: wto.org

Norway became the latest country to request consultations at the World Trade Organization (WTO) with the U.S. over its Section 232 steel and aluminum tariffs. The dispute complaint was circulated to WTO members June 19.

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“In Norway’s view, the additional tariffs imposed by the US on steel and aluminium imports are a violation of the WTO rules,” Minister of Foreign Affairs Ine Eriksen Søreide said in a prepared statement last week. “Today we have therefore requested dispute settlement consultations with the US in the WTO. The WTO and its dispute settlement system is the established forum for handling disagreements about trade policy.”

Norway, which is home to aluminum producer Norsk Hydro, is Europe’s top aluminum producer (the country is not a member of the European Union, but has membership in the European Economic Area).

According to the release from Norway’s Ministry of Foreign Affairs, only 0.2% of Norway’s steel and aluminum exports go to the U.S.

“In the long run, we all benefit from a situation where right trumps might in international trade,” Eriksen Søreide said. “Such a disregard for WTO rules weakens the credibility of the United States in international trade, and risks undermining the rules based multilateral trading system.”

India initiated a complaint against the U.S. tariffs in May. Mexico also requested consultations, while the E.U. and Canada have also done so.

Trade tensions have picked up in recent months, as the U.S. tariffs have sparked backlash from some of the U.S.’s closest trading partners. The WTO has come in for much criticism from President Trump, but figures to be a battleground — albeit a slow-moving one — for trading partners formally objecting to the U.S. tariffs.

In addition, last weekend the G7 summit in Charlevoix, Quebec, during which trade issues were paramount, ended acrimoniously when Trump tweeted that he would withdraw his support for the summit’s communique.

The communique, among other things, addressed tariffs:

“We acknowledge that free, fair and mutually beneficial trade and investment, while creating reciprocal benefits, are key engines for growth and job creation. We recommit to the conclusions on trade of the Hamburg G20 Summit, in particular, we underline the crucial role of a rules-based international trading system and continue to fight protectionism. We note the importance of bilateral, regional and plurilateral agreements being open, transparent, inclusive and WTO-consistent, and commit to working to ensure they complement the multilateral trade agreements. We commit to modernize the WTO to make it more fair as soon as possible. We strive to reduce tariff barriers, non-tariff barriers and subsidies.”

In a meeting Monday after the G7 dust had settled, German Chancellor Angela Merkel met with several leaders of multilateral agencies to stress the importance of cooperation.

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“Rising trade tensions risk a major economic impact, undermining the strongest sustained period of trade growth since the financial crisis,” WTO Director-General Roberto Azevêdo said in a joint statement. “They also pose a real systemic threat, risking far greater impacts in the longer term. We will continue working to resolve these tensions and to avoid further, damaging escalation which draws in new sectors, potentially harming more workers.”

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This morning in metals news, energy companies are lobbying for exemptions from the U.S. steel tariff, U.S. steel exports dropped in April compared with the previous month, and steel and iron ore prices fell by the greatest amount since March.

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Asking for Exemptions

Several U.S. energy companies are looking to win exemptions from the U.S.’s 25% steel tariff, Reuters reported.

Of the nearly 21,000 exclusion requests received by the U.S. Department of Commerce, more than 500 are related to pipes and related materials, according to the report.

U.S. Steel Exports Down in April

The U.S.’s steel exports fell by 1% in April compared to the previous month, according to American Iron and Steel Institute (AISI) data cited by the Times of Northwest Indiana.

The steel export level in April, however, was up 0.5% compared with April 2017.

Steel Prices Drop

Prices of steel and iron ore fell by the greatest amount since March, according to Bloomberg, as trade tensions ratcheted up in the last week. The U.S. announced $50 billion in tariffs on Chinese imports on Friday, and President Donald Trump threatened an additional $200 billion in tariffs.

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Iron ore prices fell to a two-month low, according to the report, while LME nickel, zinc and copper all also fell.

Trade relations between the U.S. and the European Union are in a tough spot these days, as the U.S. imposed its Section 232 steel and aluminum tariffs on the 28-member bloc (plus Canada and Mexico) recently, a decision yielding much consternation from the U.S.’s trading partners.

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European Steel Association President Geert Van Poelvoorde, speaking before European Steel Day last week, addressed the issue of the U.S. 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,” Van Poelvoorde said. “We also now expect to face a large loss of market share in the US, a market that accounts for 16% of EU exports.”

Van Poelvoorde also reiterated the claim that the focus should be on global overcapacity (implicitly pointing the finger at China).

“There is the need to continue discussions with the US to address the root cause of this trade dispute: global steel excess capacity,” Van Poelvoorde. “We have to deal collectively with countries that subsidise production in order to target export markets, and there are international fora for this process. Unilateral measures are not the answer.

“In the meantime, we call for an EU safeguard to be deployed as quickly as possible – the longer the delay, the greater the injury to the European steel industry will be.”

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Referring to Canadian Prime Minister Justin Trudeau, President Trump on Sunday announced his decision to withdraw from the G7 communique.

“Based on Justin’s false statements at his news conference, and the fact that Canada is charging massive Tariffs to our U.S. farmers, workers and companies, I have instructed our U.S. Reps not to endorse the Communique as we look at Tariffs on automobiles flooding the U.S. Market!” he tweeted.

Then, on Sunday, German Chancellor Angela Merkel announced the E.U. plans to strike back against the U.S. steel and aluminum tariffs with duties of its own, Reuters reported.

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This morning in metal news, steel and aluminum exports from China were up in May; the National Retail Federation CEO panned the U.S.’s tariffs; and a White House economic analysis reportedly concludes President Trump’s tariffs will hurt economic growth.

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Exports on the Rise

Despite rising trade tensions, including Section 232 tariffs on steel and aluminum, China’s export totals of steel and aluminum were both up in May, according to Reuters.

Chinese aluminum exports were at their highest level in 3 1/2 years, according to the report.

NRF CEO Criticizes Tariffs

Matthew Shay, president and CEO of the National Retail Federation, was critical of the Trump administration’s trade agenda vis-a-vis tariffs, CNBC reported.

Shay, who spoke positively about the president’s December tax cut, argued the tariffs are counterproductive.

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“It makes no sense to go down this road when we have all this momentum,” Shay told CNBC.

White House Economic Analysis Bearish on Tariffs

According to a report by The New York Times, a White House economic analysis of the impact of Trump’s tariffs concludes they will hurt economic growth.

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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.