Leibowitz on Trade: The world is being remade, and it's about a lot more than tariffs

Get ready for March tariff madness

On March 4, all imports made in Canada or Mexico will be subject to 25% tariffs. The administration suggests that the tariffs are needed because Canada and Mexico have done too little to stem the flow of illegal immigrants to the United States. Certain industries will cheer the tariffs, others will moan. The latter employ more US workers than the former.

Also on March 4, the current tariffs on all imports made in China will double from 10% to 20%. The new, higher tariffs are also ostensibly based on the failure of China to stop the flow of fentanyl and other drugs to the United States.

China will retaliate. But the Trump administration does not seem to care about that. Again, some industries will cheer the new protection, and others will cry foul—the latter group employs more American workers than the former.

On March 12, new Section 232 tariffs on steel and aluminum (and “derivative” products made with those metals) will go into effect. As of that date, steel and aluminum products from every country will be tariffed at 25%. For aluminum, that means a 15-percentage point increase for all imports, which now face a 10% tariff.

No imports will be eligible for exclusion from the elevated tariffs. That’s true even if the domestic industry does not make those products – and even if they show no interest in making them.

There are hundreds of products that fit that description. Many are used by US manufacturers to make products sold in the United States and around the world. Those manufacturers will be severely hurt by the new tariffs, which upset supply arrangements that have existed for decades.

The Trump administration does not seem to care. The new tariffs affect not only China but many long and loyal friends, including Europe, Japan, Brazil, South Korea, Australia, and many others.

Up next, reciprocal tariffs

More tariffs are undoubtedly coming. The Trump administration has announced that “reciprocal” tariffs will be next. Reciprocal tariffs would mean that the US would hit imports from Country A with the same duty rate that Country A imposes on exports from the US.

This would be a major departure from the traditional way to impose tariffs. The US and nearly all other countries impose tariffs at the same rate for all but the most nefarious countries (for the US, that would be North Korea, Cuba and very few others).

If reciprocal tariffs become the norm, the US duty rate would mirror the duty rate charged by a trading partner on similar goods.

Passenger cars are a good example. Duty rates on passenger cars vary widely among nearly 200 nations (counting the EU as one nation). Imported passenger cars from the EU (and almost everywhere else) face a 2.5% duty in the United States. In Europe the duty rate is 10%. The duty rate for cars imported into India is 125%. China is 25%, Brazil is 35%, and Japan is zero. The global average duty rate for passenger cars is 22%. (I got those duty rates are from the World Population Review for 2024.)

An April VAT attack?

There are additional issues: Almost every country other than the United States imposes value added taxes (VATs) equal to the rates paid by domestic companies for the same products. Would the president impose duties that would equal the VAT rate from Europe? There does not seem to be a limit to the tariffs he would like to impose.

On Feb. 13, the White House announced an interagency initiative to identify unfair or burdensome trade barriers imposed by other countries. What the administration does will based on findings that are currently due by April 1.

If the Feb. 13 memorandum is fully implemented, several departments (Commerce and USTR, in consultation with other agencies) will initiate administrative actions to address “unfair” reciprocal trade barriers. These proceedings could be initiated under Section 232 of the Trade Expansion Act, Section 301 of the Trade Act of 1974, antidumping and countervailing duty laws, and Section 201 of the Trade Act of 1974. (The latter is administered by the International Trade Commission, a nominally independent agency.)

The trade community needs to prepare for these proceedings, all of which could raise costs for American manufacturers, whether or not they use imported inputs. Tariffs raise prices for domestically produced goods as well as prices for imports.

If the US wishes to impose differential tariffs, legislation would be necessary. And it would be expensive to administer for companies as well as for US Customs and Border Protection (CBP).

There are a lot of open questions. They are likely to be faced. And the answers could disrupt supply relationships among many American manufacturers, retailers, and others.

Geopolitically, the US is also busy making new arrangements

Last week, President Emmanuel Macron of France and Prime Minister Keir Starmer of the UK visited the White House to discuss the tariffs mentioned above. They also talked about the Russia-Ukraine war, the Middle East, and other flash points.

We cannot forget the unbelievable White House meeting last Friday between President Donald Trump (flanked by Vice President JD Vance) and Ukrainian President Volodymyr Zelensky. The world is changing, all right. What will it look like in a month, or a year? Or three years and 11 months? That is unclear.

The law might prevent the president from taking the broad action he wants. Congress has given the president enormous power over trade policy. The president wants to test the limits of that authority. If there are no guardrails, our economic and political liberty may be on the block. Stay tuned.

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.