“Steel is far less about bilateral relations and tariffs than it is about strategy with China,” said Chad Bown, senior fellow at the Peterson Institute for International Economics.
Tariffs are popular with steel and aluminum companies and, perhaps more importantly, the unions that represent their workers. Many of them live in vital swing states like Pennsylvania. Biden’s own government has described the tariffs as “effective” in raising the domestic steel industry and its workforce.
“These are important constituencies for the Biden administration, so it would be really, really difficult to pull the rug out from under them without something significant enforceable in their place,” said Dennis Shea, a bipartisan Policy Center scholar who Trump’s deputy acted as a commercial agent and ambassador to the World Trade Organization.
A spokesman for the Department of Commerce told POLITICO that US officials were “in constructive discussions” with EU colleagues about ways to solve the steel problem. When asked about Biden’s upcoming meeting in Europe, the spokesman simply said: “We welcome the opportunity to continue this dialogue at all levels of government to ensure the viability of our critical industries.”
Still, Biden is taking some steps to enlist Europe’s help. Ahead of this week’s G-7 meeting of wealthy economies, the nations’ trade ministers pledged to address issues that have led to a steel glut, saying it was “of the utmost importance” that other nations join the effort.
“We believe that dialogue, transparency and cooperation at the global level are a crucial means of addressing the imbalances created by the deterioration in overcapacity,” said a joint statement.
This cooperative tone is a departure from the Trump years.
US Trade Representative Katherine Tai, Secretary of Commerce Gina Raimondo and European Commission’s chief trade officer Valdis Dombrovskis have agreed to negotiate a plan by the end of the year to address excess steel and aluminum capacities in China without harming their own industries.
In the meantime, the Biden government is maintaining the 25 percent tariff on steel and the 10 percent tariff on aluminum on European imports, although some trading partners like Canada and Mexico have lifted theirs.
There are also outside forces who are pressuring officials to quickly reach an agreement to abolish tariffs. In the US, powerful industrial groups such as the Chamber of Commerce and the National Foreign Trade Council have called on Biden to abolish steel and aluminum tariffs, which they believe has led to higher prices for goods containing steel and longer waiting times for deliveries.
The European Union also fought against Trump’s steel tariffs three years ago by imposing tariffs on valuable American exports such as orange juice, bourbon, Harleys and a variety of manufactured goods. Europe had threatened to double these tariffs on June 1st but agreed to hold negotiations on hold.
Europe also faces its own internal political pressures. Both the UK and the EU will soon have to decide whether to further restrict steel imports from other countries, a move introduced in 2018 after Trump’s tariffs. Your steel and aluminum industries are pushing for these measures to continue while US tariffs are in place, even if doing so risks angering other trading partners.
All these tensions continue to be based on the question of what to do with China’s surplus steel production, which has angered governments since President George W. Bush at the latest.
According to OECD data, China produced five times more steel in 2019 than in 2000 and now produces more than 50 percent of the world’s supply. Even if the US and other countries impose import duties, Chinese steel is often shipped to other countries that process it and sell it on the world market as their own, circumventing the restrictions.
Thomas Conway, international president of United Steelworkers, said during a recent event in Washington that the US-EU negotiations must resolve the problem of China selling its steel through other countries to evade tariffs, which he called “Whac-A- Mole “called. Problem.
In 2016, the Obama administration and other G-20 nations established the Global Forum on Steel Excess Capacity, an international body for countries to share information about their production and work together to reduce oversupply. But the Trump administration criticized this body for failing to hold top criminals like China accountable.
In March 2018, Trump enacted a 25 percent tariff on steel and a 10 percent tariff on aluminum on imports from almost all countries, relying on a previously underutilized provision in Section 232 of the Trade Expansion Act of 1962. The section allows for Tariffs when cheap foreign imports undermine US national security, which Trump claimed steel and aluminum imports did.
Trump’s decision separated senior members of his administration and Republicans in Congress, but calmed a contingent of union workers and manufacturers who helped him win the White House. In fact, Trump first announced the tariffs during a meeting at the White House surrounded by steel and aluminum executives.
“There is a lot of, I believe, false cynicism around 232 that the steel industry is being in some way falsely supported, but it is not,” said Leon Topalian, chief executive officer of North Carolina-based Nucor, the world’s largest steel maker USA “It was about bringing countries to the negotiating table and doing better business.”
However, critics inside and outside the White House argued that it was a blunt instrument that would do more harm to the country’s allies than to its adversaries. The main sources of foreign steel at the time were Canada, South Korea, Mexico, Japan, and Germany, with China producing a much smaller proportion of US imports.
The Trump administration then exempted Brazil, South Korea and Argentina from steel tariffs after these nations agreed to restrict their exports to the US. Australia was also granted an exception. Mexico and Canada received tariff waivers as part of talks on the US-Mexico-Canada agreement.
Now Biden has to come to an agreement with Europe. But what to do about China’s production that has not yet been tried remains the key question.
At the moment, the Global Forum on Steel Excess Capacity can do little to help Biden. China and India left the group, leaving them without the world’s leading steel producers.
The U.S. Chamber of Commerce calling on Biden to lift the tariffs suggested last month that the government re-emphasize the forum and work with allies to monitor and prevent import increases, similar to the U.S. agreement with Canada and Mexico.
“I don’t think 232 will stay in place forever, but I think it’s an important tool right now,” said Topalian, who was recently named chairman of the American Iron and Steel Institute, a trade association. “We must continue to work with the administration on how … we ensure a level playing field.”