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June 4, 2018

MSCI Responds To Decision To Impose Steel And Aluminum Tariffs On NAFTA Trading Partners

On May 31, President Donald Trump announced his administration would end Section 232 steel and aluminum exemptions for Canada, Mexico, and the European Union. This decision meant the penalties, set at 25 percent for steel and 10 percent for aluminum, took effect at midnight on June 1.

In a statement released to the press, MSCI said:

“As a North American trade association representing metals companies, MSCI believes U.S., Canadian, and Mexican officials should continue discussions with a sense of urgency to update NAFTA and strengthen our ties to our NAFTA trading partners. The focus of the Section 232 penalties should be non-market economies like China that subsidize their steel and aluminum producers and that routinely circumvent international law. From the start of the administration’s Section 232 investigations, MSCI has argued these penalties should be targeted toward non-market systems. As MSCI explained in its NAFTA testimony last year, NAFTA has positively impacted the manufacturing sectors in all three nations, fostering a $1 trillion annual trading relationship that is beneficial to both businesses and consumers. The U.S.’s allies in Canada and Mexico are good, reliable trading partners, and are not the cause of global steel and aluminum oversupply. We hope through ongoing NAFTA modernization talks, negotiators can strengthen this relationship and reach a speedy resolution on the Section 232 penalties.”

The European Union and Canada already have opened a World Trade organization case regarding the tariffs while Canada announced it will impose tariffs on $13 billion in U.S. goods.

Republican leaders on Capitol Hill also are unhappy with the Trump administration’s decision. U.S. House Speaker Paul Ryan (R-Wis.) and House Ways and Means Committee Chairman Kevin Brady (R-Texas) also asked the administration to reconsider and to end penalties for U.S. allies.

As a reminder, MSCI submitted testimony to the U.S. Commerce Department in its Section 232 steel and aluminum investigations last year. Both pieces of testimony are available here. In our testimony, we argued the U.S. metals sector has been harmed by unfair trading practices, but focused on China as the main culprit. We made it clear trading partners like Canada and Mexico should not be penalized. Additionally, MSCI’s NAFTA comments to the Office of the U.S. Trade Representative, which highlight the benefits of the U.S.’s trading relationship with Canada and Mexico, are available here. The United States enjoys a substantial and beneficial metals trading relationship with Canada and Mexico. These penalties should be targeted toward non-market countries like China that have routinely and flagrantly thwarted international and U.S. trade law.

MSCI will continue to argue that Canada and Mexico be exempted from these penalties. MSCI also will continue to encourage the administration to address circumvention. As MSCI said in March when the Section 232 penalties were announced, the Trump administration’s policy does not address this problem. MSCI’s mission is to foster healthy supply and healthy demand for industrial metals. The Commerce Department has instituted a process by which certain articles can receive relief from the tariffs, but, because of the volume of requests, that process is moving slowly. Federal lawmakers have recommended changes to the process and we are tracking their efforts to alter the process. Please continue to check Connecting the Dots for updates.

President Trump’s announcement last week affected other countries as well. His order also called for:

  • 25 percent tariffs on steel products on covered categories of imports from all countries except Australia, Argentina, Brazil and South Korea; and
  • 10 percent tariffs on aluminum products on covered categories of imports from all countries except Australia and Argentina.

South Korea had agreed to a quota arrangement on steel imports in March. More information on the South Korea quota can be found through U.S. Customs and Border Protection (CBP) postings here, here and here. Argentina has agreed to steel and aluminum quotas and Brazil has agreed to a steel quota as indicated in the updated proclamations. Australia has been indefinitely exempted from both steel and aluminum tariffs by agreeing to an undefined “alternative means to address the threatened impairment to [U.S.] national security” that is neither a tariff or a quota. U.S. Customs and Border Protection issued this notice on entry instructions last week. The proclamations set volume and value limitations of imports of each product that can be brought in on a quarterly basis. Click here for more information on the quotas.