America First Trade Policy: A New Era of Tariff Reviews on Steel and Aluminum Imports
In its first day, the Trump Administration issued a series of executive orders and policy memoranda designed to reshape U.S. economic policy, including a significant package aimed at trade relations. One of the key components of this package is a release titled the "America First Trade Policy," which includes a new investigation into potentially adjusting tariffs or import restrictions on steel and aluminum imports. This move signals a fresh round of scrutiny and policy changes for industries heavily reliant on these vital materials.
The Role of Section 232 of the Trade Expansion Act
At the heart of this new initiative is Section 232 of the Trade Expansion Act of 1962, specifically Title 19 of the U.S. Code, which grants the president the authority to impose tariffs or restrictions on imports of goods that threaten national security. In the context of steel and aluminum, the Trump administration has tasked the Assistant to the President for Economic Policy to review the current tariff exclusions and exemptions on these materials, evaluating whether the existing import adjustments effectively safeguard U.S. national security.
Under this review process, the Secretary of Commerce, along with other key officials, will assess whether additional actions are necessary to protect U.S. industries. The review will culminate in a report, due by April 1, 2025, just 70 days from the start of the investigation, which could recommend imposing stricter tariffs or new import measures.
Background: Previous Tariffs Under the Trump and Biden Administrations
In 2018, President Trump enacted a 25% tariff on imported steel and a 10% tariff on aluminum, based on the findings of a Section 232 investigation. The tariffs were aimed at bolstering U.S. manufacturing and addressing concerns that cheap imports were undermining domestic production capabilities. However, the tariffs sparked disputes with trade partners and led to a series of negotiations and exceptions.
For example, tariff rate quotas were established with the European Union, Japan, and the United Kingdom, temporarily suspending tariffs on certain steel and aluminum imports from these regions. Additional exceptions were granted for steel and aluminum derivatives, creating a patchwork of exclusions and varying tariff rates across different product categories.
Under President Biden, the Section 232 tariffs continued to shape trade policy. In July 2024, the U.S. imposed a 25% tariff on steel and derivative products imported from Mexico if the steel was melted and poured in a third country. Similarly, tariffs on aluminum imports from Mexico ranged from 10% to 200%, depending on where the aluminum was smelted.
Exclusions and Their Economic Impact
Under Section 232, exclusions from tariffs may be granted under two primary conditions:
1. Lack of Domestic Availability: If a particular type of steel or aluminum is not sufficiently available in the U.S. or is not produced in a satisfactory quality.
2. National Security Considerations: If excluding a product is deemed necessary to protect national security interests.
For U.S. companies, these tariffs have already led to significant increases in the cost of steel and aluminum products. The imposition of tariffs increases production costs, which are then passed on to businesses and consumers. The potential for more tariff restrictions or adjustments could further disrupt supply chains and inflate costs for industries dependent on these imports, such as construction, automotive, and manufacturing.
Impact on U.S. Firms and Future Trade Relations
As the U.S. administration moves forward with this new investigation, many industries are watching closely. The review could bring about changes to the tariff landscape, with potential implications for firms that import steel and aluminum products. Increased tariffs or tighter import restrictions would likely lead to higher prices, affecting companies’ bottom lines, and potentially creating ripples throughout the economy.
Given the complexity of the global trade environment and the reliance on foreign-made steel and aluminum, U.S. companies may face challenges in securing affordable raw materials if tariffs are adjusted. The continued uncertainty could also make international trade relations more difficult, as countries affected by these tariff changes could respond with retaliatory measures.
What’s Next?
The administration’s review is expected to spark discussions about how best to balance economic growth, national security, and the needs of industries that rely on imports. The findings of the review will likely influence U.S. trade policy moving forward, shaping the future of steel and aluminum tariffs.
U.S. companies, especially those that are heavy consumers of steel and aluminum, should stay vigilant about developments regarding the America First Trade Policy. It is essential to stay updated on potential tariff changes that could affect product costs and overall market conditions.
In the meantime, industry stakeholders must continue to monitor the progress of the Section 232 review and prepare for any adjustments that may impact the cost structure of U.S. manufacturing. The outcome of this investigation will have significant consequences for U.S. industries and their relationships with global trade partners.
