Published 8:55 a.m. ET March 8, 2018 |
Washington — President Donald Trump on Thursday imposed steep 25 percent tariffs on foreign steel and 10 percent tariffs on foreign aluminum, despite strong opposition from fellow Republicans in Congress and the U.S. auto industry. But he temporarily exempted Canada and Mexico as leverage to renegotiate changes to the North American Free Trade Agreement.
Trump signed a proclamation making it official Thursday despite warnings the action could spark a global trade war and increase prices of U.S.-made goods, including automobiles. The action drew immediate condemnation from members of Congress and the auto industry.
The White House said Thursday the tariffs will take effect in 15 days and the exemptions for Canada and Mexico will last as long as the president sees fit.
“Our industries have been targeted for years and years, decades in fact, by unfair foreign trade practices, leading to the shuttered plants and mills, the laying off of millions of workers and the decimation of entire communities, and that’s going to stop,” said Trump, who was flanked by steel and aluminum workers, some carrying hard hats.
“This is not merely an economic disaster, but it’s a security disaster,” he continued. “We want to build our ships, we want to build our planes, we want to build our military equipment with steel, with aluminum from our country. And now we’re finally taking action to correct this long overdue problem. It’s a travesty.”
Trump said foreign steel and aluminum operations that want to avoid the tariffs could relocate to the United States.
The president said he would hold off imposing duties on Canada and Mexico, which are in stalled NAFTA talks, as the U.S. demands greater domestic content for vehicles made in those countries. “If we don’t make the deal… then we’re going to terminate NAFTA and we’re going to start all over again, or do it a different way,” he said.
Trump suggested in a meeting with his Cabinet earlier Thursday that Australia and “other countries that also are very much involved with us on trade, and also on working together with military” might also be spared from tariffs, citing a favorable trade balance between Australia and the U.S.
The official signing of the action follows a week in which congressional Republicans split with the president on trade amid retaliatory threats from foreign leaders and pleas from leaders of the auto industry and other sectors about the increased costs that would be associated with a potential trade war.
Immediately after Thursday’s signing, House Speaker Paul Ryan, a Republican, said, “I disagree with this action and fear its unintended consequences.” He said there are bad trade practices by nations like China, but repeated his contention that the better approach is targeted enforcement. “Our economy and our national security are strengthened by fostering free trade with our allies and promoting the rule of law,” he said.
The European Union has threatened retaliation for tariffs, including taxes on imports of Harley-Davidson motorcycles built in Ryan’s home state of Wisconsin.
In a Ford Motor Co. statement released after Thursday’s announcement, the company said, “Despite the fact that Ford buys the vast majority of its steel and aluminum for U.S. production in the U.S., this action could result in an increase in domestic commodity prices — harming the competitiveness of American manufacturers.”
General Motors Co. said in a statement it buys more than 90 percent of its steel for U.S. production from domestic suppliers. The automaker said it was encouraged by the temporary exemption for Canada and Mexico.
“In the near term, there will be little impact to us from the tariff itself,” GM said. “We will be impacted by any general U.S.- sourced steel price increases, but we do not expect a material impact given the majority of our contracts are longer term. And for any longer term impact, we have shown we have the ability to adjust and adapt to a variety of market changes around the world and that will be our approach on this issue as well.”
John Bozzella, CEO of the Association of Global Automakers that represents foreign-based manufacturers, added: “Exemptions will not address the fundamental problems tariffs will create for U.S. car and truck manufacturing. Increased costs will make our industry less competitive and harm American workers, consumers, and our economy.”
A Goldman Sachs study showed GM and Ford could stand to lose $1 billion per year in profits under Trump’s tariff plan. Ford recently introduced an aluminum body for its new Expedition SUV. Ford’s popular F-150 pickup also has large quantities of aluminum in its body.
Sen. Jeff Flake, R-Ariz., said in a statement Thursday that he is planning to immediately introduce legislation to nullify the tariffs.
“These so-called ‘flexible tariffs’ are a marriage of two lethal poisons to economic growth — protectionism and uncertainty,” Flake said. “Trade wars are not won, they are only lost. Congress cannot be complicit as the administration courts economic disaster.”
But Thomas Gibson, president and CEO of the American Iron and Steel Institute, which lobbies for North American steel producers, supported Trump’s decision: “The president’s action today is key in stemming the tide of unfair foreign imports and putting steel workers back to work.”
The threat of tariffs had upended talks about restructuring NAFTA. Automakers have warned the Trump administration about the risk and disruption of pulling out of the trade agreement, but Trump has vowed to do just that if Canada and Mexico balk at his terms.
The day’s events transpired as the Trans-Pacific Partnership — which was the 12-country trade deal with Asian countries that Trump abandoned almost immediately after taking office — was ratified Thursday by the remaining 11 nations, including Canada and Mexico.
Trump campaigned heavily on protectionist policies, frequently identifying international trade deals like NAFTA and the TPP as ones that he would rip up.
The Dow Jones industrial average and the Standard & Poor’s 500 index, which had fallen last week after the surprise announcement of the tariffs, rose Thursday as it became clear there would be exemptions for certain countries. They ended the day up 0.4 percent and 0.5 percent, respectively.
Detroit automakers ended the day mixed. GM shares climbed 1.3 percent, but Ford fell 0.2 percent and Fiat Chrysler Automobiles fell 0.9 percent.
U.S. aluminum and steel stocks, which had declined earlier Thursday on expectation there would be exemptions, took a hit. U.S. Steel Corp. closed down 2.9 percent after earlier falling as much as 4.6 percent, while Nucor Corp. dropped 2.6 percent. Aluminum producer Alcoa Corp. declined 0.9 percent, while Century Aluminum Co. was down 7.5 percent.