Leibowitz on Trade: Tariffs and the metals trade

So, the first big question is whether current law authorizes the president to take immediate and unilateral action. In my view, probably not. But if he does, the courts will have to decide whether the law backs the president or not.

Famously, the president-elect has said that he will impose 10-20% tariffs on most or all imports from all countries and 60% (or more) on imports from China. Are those numbers on top of the current Section 232 and Section 301 tariffs? That is probably the president-elect’s wish.

Administration’s role

Will his Cabinet play a role in those decisions? Almost certainly—key Cabinet departments, like Commerce, State, Treasury, Homeland Security (which includes US Customs), Labor, Agriculture, and the US Trade Representative will likely be consulted. Of these, nominations have been announced for all but the USTR appointment, as of press time.

The White House staff must also get up to speed. Most employees at the White House do not require Senate confirmation and now are involved in getting up to speed. However, the communications between the outgoing and incoming administrations have not been smooth; key agreements preventing the transition team from receiving briefings on sensitive issues have not been signed.

Even after the transition briefings are set, it will take some time for all the Cabinet members to get up to speed on the many issues surrounding trade and tariffs. This may frustrate those who would like to see immediate action on “day one”—a hackneyed phrase obsessively used by presidential candidates over the last several decades and rarely literally achieved.

Evaluation of existing tariffs will be needed

Probably later on, the new Trump team will need to evaluate the existing tariffs and determine what changes, if any, should be made. The Biden team recently changed the Section 301 tariffs on China. Will those changes be locked in, or will other changes be made? We don’t know.

Regarding the Section 232 tariffs, the current 25% tariffs on steel and 10% tariffs on aluminum could be up for review. In addition, the EU, Brazil, Japan, Korea, and Argentina have quota agreements with the US rather than tariffs. The EU quota agreement is currently set to expire at the end of 2025—and the retaliatory tariffs by the EU against American exports are scheduled to resume in March of next year.

Canada, Mexico, and Australia are not subject to tariffs or specific quotas, although all three have made express or implied commitments to monitor their steel and aluminum exports. The new team will advise the president on what actions should be retained and which should be changed.

The economy and American businesses face uncertainties galore in 2025. President-elect Trump has regularly stated that he wants to impose additional tariffs on all goods (presumably including steel and aluminum), but whether he can do this on his own or only with congressional authorization is still being debated. The legal and political battle lines over these issues are currently being discussed, but decisions have yet to be announced.

Imports from China could very soon face additional tariffs, too—steel and aluminum imports already face the Section 232 tariffs, as well as Section 301 tariffs on most imports. The tariff under Section 301 could rise to 60% or more, knocking many imports from China out of the US market.

There are political forces at work that might create divisions within the new administration and between that administration and Congress, despite Republican control over both the Executive branch and Congress. Tariffs will impact inflation, affecting not only import prices but domestic prices as well. Concerns over the lingering effects of the COVID-induced inflation could affect the new administration’s policies in 2025. Tariffs may be delayed or at least moderated, and negotiations could ensue to forgo or reduce tariff increases in exchange for other countries’ forbearance from retaliation. The tariff increases could, therefore, take a while to unfold.

Metals recycling

All this will affect industries nationwide, including metal scrap and recycling. The US imports substantial quantities of steel and aluminum scrap and exports a lot, too. But all forms of steel and aluminum are widely traded. A trade war, which is very possible next year, could stifle trade in both directions for metal scrap. This could lead to increasing demand in the US for domestically generated steel and aluminum scrap. Whether domestic scrap can handle the additional demand is up for debate.

Day-one action?

We will see on Jan. 20 whether the president will take action on trade “on day one.” Tempers could flare from the start if a trade war is a day-one priority. While one hopes that cooler heads will prevail on trade issues, especially with friendly countries, there is no guarantee.

Undoubtedly, businesses that benefit from trade protection will aggressively push for more. They nearly always do.

Other businesses that stand to be hurt by trade restrictions (and retaliatory actions) will surely step up, too. They will seek support from members of Congress and opinion leaders around the country. The forces of protectionism are strong but not all-powerful; they are sure to be challenged.

These are strong forces at play that no one can control. War can spread, allies may need help, and the US may need help too. The crucially important issues now at play in the world will make it hard to argue that more restrictions are essential for national security when they affect friends, not adversaries.

All these forces make predicting the next 12 months very difficult. There will be opportunities. Affected companies, associations, and workers will exploit these opportunities as the Trump team takes over and gets its sea legs.

Editor’s note

This is an opinion column. The views in this article are those of an experienced trade attorney on issues of relevance to the current steel market. They do not necessarily reflect those of SMU. We welcome you to share your thoughts as well at info@steelmarketupdate.com.