Manufacture This

The blog of the Alliance for American Manufacturing

Preliminary deals with Australia, Argentina & Brazil reached; deal with South Korea is finalized.

He waited until the eleventh hour — O.K., well more like the 7 o’clock hour — but President Trump ultimately made up his mind on Monday night about whether to impose steel and aluminum tariffs on the European Union (E.U.).

He decided to postpone said decision until June 1.

The 30-day extension gives the Trump administration additional time to continue negotiations with the E.U., along with a little breathing room as an American trade delegation heads to China this week for talks on ongoing issues like steel and aluminum overcapacity and intellectual property theft.

Along with the delay for the E.U., the administration also announced that it will wait 30 days to decide whether to impose tariffs on Canada and Mexico, as work continues with those nations to renegotiate the North American Free Trade Agreement (NAFTA).

Team Trump also finalized a previously announced trade agreement with South Korea, and said it has reached “agreements in principle” with Argentina, Australia, and Brazil.

So what does all of this mean?

The ultimate goal, of course, is to finally get China to significantly reduce its massive steel and aluminum overcapacity, which has flooded the global market and led to layoffs and plant closures in both the United States and Europe.

This isn’t a new problem. Former President Barack Obama issued tariffs on individual steel products from countries like China and worked the diplomatic circuit for years to pressure the Chinese to make good on their repeated promises to reduce capacity.

But China repeatedly broke those promises, and so Trump took things up a notch by issuing the broader tariffs. In doing so, he angered traditional trade allies like the Europeans, which threatened retaliation. French President Emmanuel Marcon and German Chancellor Angela Merkel even came to Washington last week to encourage Trump to give the E.U. a permanent exemption.

With the extension, there is additional time for the United States and E.U. to reach common ground and turn their full attention back to China. While the E.U. wants a permanent exemption, the Trump administration seems to favor establishing quotas with individual nations — which is what South Korea, Argentina, Brazil and Australia agreed to — and also wants allies to ramp up pressure on China.

AAM President Scott Paul told various media outlets on Monday night that there is evidence that the administration’s strategy is starting to work. Both the E.U. and Canada have “introduced steeper measures in recent months to crack down on cheap flows of steel into their markets, and to stop China from shipping steel through their countries to the United States,” the New York Times reported.

“I don’t think that the exemptions should go on indefinitely,” Paul said during an appearance on Fox News @ Night. “I do think we should have expectations, even from the E.U., about taking a tougher line with China on all of this. [China's] behavior has been costly to workers in Europe, it’s been costly to workers in the United States.”

 

Will Trump's strategy work? Will the U.S. reach an agreement with the E.U.? Will a NAFTA deal be finalized in the coming weeks? Will China actually begin to reduce its overcapacity in a meaningful way? Stay tuned to the blog for updates, same bat-time, same bat-channel.