A quota system for U.K. imports, as well as a melted-and-poured standard and production audits for Chinese-owned steelmakers.
U.S. and U.K. officials have reached an agreement that will have the United States lift Section 232 tariffs on British steel and aluminum imports in exchange for the United Kingdom removing retaliatory tariffs on American Harley-Davidson motorcycles, whiskey, blue jeans and tobacco.
The Section 232 tariffs were placed on nearly all imports of steel and aluminum in 2018 by the Trump administration after a prolonged import surge of those metals – caused by chronic excess Chinese production capacity – threatened the viability of those metals industries in the United States. As such, it was declared a national security threat and the tariffs went up.
The Alliance for American Manufacturing supported that action, particularly regarding steel, because we think maintaining a viable domestic industry is indeed important to national security. But don’t take it from us, take it from Bloomberg which described steelmaking this way in an article published like 12 hours ago: “Steel is a foundation of the modern economy. The ubiquitous commodity underpins the world as we know it, a key material in everything from skyscrapers and cars to washing machines and railways.”
Anyway, those tariffs have worked well. Under their cover the American steel industry has bounced back, hiring on thousands of workers and investing billions of dollars in capital improvements even as import numbers crept back up and the Biden administration negotiated bilateral deals with Japan and economic blocs like the European Union to replace their tariffs with import quotas.
The EU deal, agreed to last November, dangled the possibility of adding a section that would incentivize emissions reductions in the steelmaking process, but codified a stipulation that European steel would only avoid tariffs if it was actually melted and poured there – as opposed to made by a state-owned enterprise in China and then gently retouched in an EU mill before being sold in the U.S. market.
The U.S.-U.K. deal, cut this week in Baltimore and finalized in Washington, will apply similar rules. There will be a quota, meaning only so much British steel will be sold into the States before it again faces a tariff. And to qualify for the quota the steel must be melted and poured in the U.K.
What’s more, any participating U.K. steelmaker owned by a Chinese entity will be subjected to annual audit to establish “there is no evidence of market distorting practices by that producer in the UK that would materially contribute to non-market excess capacity of steel.” At present, that will apply to British Steel, acquired by China’s Jingye Group in 2020. But should other companies be purchased by Chinese firms, the same audit rule will apply.
We’ll take it … provided we take a moment to let the domestic steel market catch up to bump in imports its about to absorb. In a statement, AAM President Scott Paul said:
“We welcome the Section 232 relief adjustment with the United Kingdom and note in particular the landmark auditing requirement for certain Chinese investment in British Steel. We also believe a significant pause is in order on further adjustments to Section 232 steel measures while the market absorbs recent changes made with respect to Japan, the European Union, and now the United Kingdom. The question now is how the U.S.-E.U. global arrangement will address carbon intensity and non-market production as those negotiations get underway.
“The Russian invasion of Ukraine should remind us all just how critical the domestic steel industry is to our national and economic security. Section 232 quotas and tariffs have permitted the American steel industry to recover, invest, hire, and contribute robustly to our national defense.”