The administration of United States President Joe Biden could use the United States-Mexico-Canada (USMCA) trade agreement manual when negotiating with the European Union over the future of tariffs. section 232, according to a lobbying and advisory group.
“I think we’re going to see changes in the EU’s Article 232 policy,” said Samir Kapadia, director of operations for the Vogel Group, a lobbying and government relations firm based in Washington, DC.
The U.S. Trade Representative and Commerce Department aim to reach agreement with Europe on Section 232 of the 1962 Trade Expansion Act by November 1 – the United States and the EU agreed on the November deadline after EU Trade Chief Valdis Dombrovskis and US Commerce Secretary Gina Raimondo spoke in July.
“I think [Biden] could come to the table to moderate Section 232 tariffs with the EU given its broader political goals with China, ”Kapadia told Fastmarkets on Tuesday, Sept. 21.
“Biden needs the support of the EU and others to hold China accountable on a wide range of fronts – it seems likely that a Canada / Mexico type exemption could be achieved by the end of this year.” , Kapadia said.
The Section 232 tariffs – which came into effect on March 23, 2018 – imposed a 25% tax on imported steel and 10% on imported aluminum, and were designed to prevent imports that carry threat to national security.
The EU suggests that the United States impose TRQs on steel and aluminum imports from the trading bloc to resolve their trade dispute, although switching to TRQs is not the only solution being considered, sources told Fastmarkets.
Under the USMCA, Section 232 tariffs on Canadian and Mexican imports were canceled in May 2019 in exchange for a monitoring mechanism.
The Biden administration’s approach is very different from the Trump administration’s “siled approach,” Kapadia told Fastmarkets.
US Trade Representative Katherine Tai said in May that Section 232 needed to be modernized, to widespread applause from steel industry groups.
Biden’s infrastructure bill
Passing the US $ 3.5 trillion infrastructure bill – which allocates $ 1.2 trillion for roads, bridges, and trains, among others – will increase the odds that the potential outcome of trade rights will be replaced by a monitoring mechanism, Kapadia said.
The infrastructure bill contains strict “Buy in America” provisions, which should potentially appease current supporters of Section 232 tariffs, Kapadia told Fastmarkets.
Supporters of Section 232 argue that trade rights are necessary to prevent excess global steel capacity from threatening the US steel industry.
The duties also punish exporters who have used unfair tactics to undermine U.S. producers, Cleveland-Cliffs CEO Lourenco Gonçalves said in May.
Any agreement between the EU and the United States must include mechanisms that will prevent increases in European shipments to the United States, wrote the USW, the American Iron and Steel Institute and the Steel Manufacturers Association in a letter to Biden on September 3.
Opponents of Section 232 say the tariffs hurt domestic manufacturers and end consumers of steel and aluminum in the United States.
A recent presentation by US steel producer Nucor Corp showed that imports of steel plate to the United States declined to 13% market share in 2020, from 19% in 2015.
Following the implementation of Section 232 tariffs in 2018, Fastmarkets’ daily hot-rolled steel coil index, the US fob plant jumped to $ 45.84 per cwt (916, $ 80 per short ton) in early July of the same year – near a 10-year high at the time.
The index was calculated at a record high of $ 98.25 per cwt ($ 1,965 per short ton) earlier this week on Monday.
The aluminum premium in the United States also experienced significant volatility after the introduction of Section 232 tariffs, ending in March 2018 at 18.75-19.25 cents per pound, down from 14.00- 14.50 cents per pound at the beginning of the month.
Fastmarkets valued premium P1020A aluminum, Midwest US ddp at 34.50-36.00 cents per pound on Tuesday, September 21, unchanged for a fifth week at an all-time high.