Trump delays call on steel and aluminum tariffs

President Donald Trump decided in March to slap tariffs of 25 per cent on imported steel and 10 per cent on imported aluminum. Picture / AP

The White House says it will postpone a decision on imposing tariffs on US imports of steel and aluminum from the European Union, Canada and Mexico for 30 days, avoiding the potential for a trade battle with Europe as the US prepares for tense trade talks in China this week.

The Trump Administration said it had reached an agreement with South Korea on steel imports following discussions on a revised trade agreement, the outlines of which were previously announced by US and South Korean officials. And the Administration said it had also reached agreements in principle with Argentina, Australia and Brazil on steel and aluminum that would be finalised shortly.

Announcing the trade actions, the White House said "in all of these negotiations, the Administration is focused on quotas that will restrain imports, prevent transshipment and protect the national security".

Facing a self-imposed deadline, President Donald Trump was considering whether to permanently exempt the EU and Mexico, Canada, Australia, Argentina and Brazil from tariffs that his Administration imposed last month on imported steel and aluminum.

The White House provided temporary exemptions in March and had until today to decide whether to extend them.

The EU has said if it lost its exemption it would retaliate with its own tariffs on US goods imported to Europe.

The confrontation stems from the President's decision in March to slap tariffs of 25 per cent on imported steel and 10 per cent on imported aluminum.

Trump justified the action by saying it was needed to protect American metal producers from unfair competition and bolster national security. But the announcement, which followed an intense internal White House debate, triggered harsh criticism from Democrats and some Republicans and roiled financial markets.

At the time, Trump excluded several vital trading partners — the European Union, Mexico, Canada, Australia, Argentina and Brazil — from the tariffs.

That meant the steel tariff covered just 30 per cent of all imports, according to Oxford Economics. If all the exemptions were ended, it would have deepened the impact of the tariffs on American companies that use steel and potentially affect financial markets. Stock prices fell nearly 2 per cent when the tariffs were announced.

Two people familiar with the process said the Trump Administration had been considering whether to provide a short-term extension of the exemptions to allow for more time to review the countries' efforts to secure permanent exemptions.

One of the officials said the US trade representative had been overseeing the process for all of the countries except for the European Union, whose tariffs were being evaluated by the Commerce Department.

The officials spoke on condition of anonymity to describe internal deliberations.

Germany, the EU's largest steel exporter to the US, accounted for about 5 per cent of US steel imports last year. Picture / AP

The EU and others had been asked to spell out what limits they could accept on the amount of steel they exported to the United States, how they would address the issue of excess production of steel and aluminum and how they would support the US before international bodies like the World Trade Organisation. Security relationships with the US have also been part of the criteria.

South Korea agreed to limit its exports to the United States as part of broader discussions involved in updating its bilateral trade agreement with the US and was granted a permanent exemption.

China, Japan and Russia have not received exemptions from the duties. That will likely reduce steel shipments from those countries over time.

Commerce Secretary Wilbur Ross last week said that quotas on imports from Europe and other countries were necessary so imports from those countries did not simply replace Chinese imports. The goal of the tariffs was to reduce total steel imports and boost US production, Ross said.

"If you let everybody back out of the tariff, and you let them out of any kind of quota, how would you ever reduce the imports here?" Ross asked at a conference of business journalists.

Ross was set to discuss the issue today with EU Trade Commissioner Cecilia Malmstrom.

Germany, the EU's largest steel exporter to the US, accounted for about 5 per cent of US steel imports last year. South Korea made up the largest share, shipping about 13 per cent of US imports, according to an American Iron and Steel Institute analysis of government data.

The EU has compiled a list of retaliatory tariffs worth about US$3.5 billion ($5b) it would impose if its steel and aluminum was not exempted.

European leaders have resisted the idea of a quota. German Chancellor Angela Merkel said that she discussed the issue with French President Emmanuel Macron and British Prime Minister Theresa May after returning from a White House visit last week.

The three European leaders "agreed that the US ought not to take any trade measures against the European Union", which was "resolved to defend its interests within the multilateral trade framework", Merkel said.

In her meeting with Trump, Merkel said, she saw little progress in obtaining permanent exemptions.

"The decision lies with the president," she said.

A United Kingdom spokesperson called today's postponement "positive" and said, "We will continue to work closely with our EU partners and the US government to achieve a permanent exemption, ensuring our important steel and aluminum industries are safeguarded".

In a separate trade battle with China, the United States has threatened to impose tariffs on US$150b of Chinese goods in retaliation for what it argues are Beijing's unfair trade practices and its requirement that US companies turn over technology in exchange for access to its market. The White House also wants China to agree to reduce its US$375b goods trade surplus with the US.

China has said it would subject US$50b of US goods to tariffs if the US taxes its products. Trump has announced that an administration delegation led by Treasury Secretary Steven Mnuchin, US Trade Representative Robert Lighthizer and trade adviser Peter Navarro would visit Beijing for negotiations this week.

In addition to Mnuchin, Lighthizer, Ross and Navarro, the group will include economic adviser Larry Kudlow, US Ambassador to China Terry Branstad and Everett Eissenstat, deputy assistant to the President for International Economic Affairs.

"We're going to have very frank discussions," said Mnuchin in an interview broadcast on Fox Business.

Most analysts, however, think it is unlikely the talks will reach permanent agreements and will more likely mark the start of longer-term negotiations.