U.S. Faces $3.45 Billion in Tariffs from Ticked-Off Trade Partners

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By Bryce Baschuk

President Donald Trump‘s gambit to save the U.S. steel industry could soon bite back against U.S. farmers and manufacturers as America’s trade partners prepare $3.45 billion worth of retaliatory tariffs on U.S. goods.

Over the past week the European Union, India, Japan, Russia, and Turkey separately told the World Trade Organization that they may impose countermeasures on the U.S. as soon as June 21 if Trump doesn’t remove his global tariffs on steel and aluminum.

The EU said it may immediately retaliate with $1.60 billion in tariffs; Russia promised $537.6 million in tariffs; Turkey pledged $266.6 million worth of tariffs; Japan said it may retaliate with $264.3 million in tariffs; and India said it could impose $165.6 million worth of tariffs on U.S. goods.

China already imposed $611.5 million worth of retaliatory duties on 128 U.S. products beginning April 2 and filed a WTO dispute case that claimed the U.S. tariffs violated WTO rules.

The overall goal is to pressure the Trump administration to withdraw the metal duties by specifically targeting U.S. goods that are produced by voters in states that sent Trump to the White House.

Other than China, it remains unclear if any of the aggrieved parties will actually move forward with their proposed tariffs against the U.S. when a key WTO deadline expires on June 21.

Members of the Trump administration are expected to discuss the issue with global trade ministers in Paris the week of May 28 at a WTO mini-ministerial meeting scheduled to take place on the sidelines of the Organization for Economic Cooperation and Development Forum.

Safeguard Approach

In the weeks since Trump imposed on March 23 his tariffs of 25 percent on imported steel and 10 percent on aluminum, various WTO members followed a similar game plan that relied on WTO rules to respond to the Trump administration’s trade move.

Each country claimed that Trump’s steel and aluminum tariffs were safeguard measures, which are temporary trade restrictions that help countries protect their domestic producers from a sudden surge of imported products.

Though the WTO permits countries to apply safeguard tariffs, it also requires members that use them to consult with any substantially affected WTO members to consider compensation for lost trade.

The U.S. in April rebuffed various requests for compensation under the aegis of the WTO Safeguards Agreement because the U.S. said its tariffs were national security measures, not safeguards.

The Trump administration said its tariffs were implemented according to Section 232 of the Trade Expansion Act of 1962, which permits the president to impose trade restrictions if imports are found to harm U.S. national security. The U.S. then expressly linked its metals tariffs to the WTO’s national security exemption, which permits governments to take “any action which it considers necessary for the protection of its essential security interests.”

‘Substantially Equivalent’ Tariffs

China, the EU, India, Japan, Russia, and Turkey all said their proposed countermeasures align with Article 8 of the WTO Safeguards Agreement, which allows WTO members to apply “substantially equivalent concessions or other obligations” in response to another member’s safeguard measures.

The six WTO members said their retaliatory duties would take effect on or before June 21, which marks the end of a 90-day WTO implementation period that began when Trump imposed the tariffs.

Though the WTO typically requires a three-year moratorium on safeguard countermeasures, Article 8.3 of the Safeguards Agreement permits governments to immediately trigger countermeasures if there’s no evidence that the original tariffs were imposed as a result of an “absolute increase in imports.”

The six members said that a majority, if not all, of the U.S. tariffs were not imposed as a result of an absolute increase in imports, and as such, the countries said they don’t have to await the expiration of the WTO’s three-year moratorium to impose their countermeasures.

Dispute Pending

Various WTO members also are participating in China’s dispute consultations with the U.S. over Trump’s steel and aluminum tariffs.

The U.S. contested China’s ability to challenge the matter in a WTO dispute and argued that “tariffs imposed pursuant to Section 232 are issues of national security not susceptible to review or capable of resolution by WTO dispute settlement.”

If China’s dispute consultations with the U.S. fail to produce a mutually acceptable outcome by June 4, China may ask the WTO dispute settlement body to investigate the matter and deliver a ruling within a year or two.

The dispute settlement process could be extended further upon appeal, though the appellate body may cease to function if the Trump administration maintains its block on new appellate body nominees beyond December 2019.

To contact the reporter on this story: Bryce Baschuk in Geneva at correspondents@bloomberglaw.com

To contact the editor responsible for this story: Jerome Ashton at jashton@bloomberglaw.com

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