Senators Question Sense of Brazilian Steel Tariffs; Retaliation Unlikely, Experts Say
Two prominent Republicans questioned the suitability of switching tariffs for quotas because of currency manipulation in Brazil and Argentina, as President Donald Trump said Dec. 2 he is doing. Sen. Pat Toomey, R-Pa., the leading critic of Trump's trade policy, issued a statement that night that said, “He is justifying these tariffs by citing Section 232 of the Trade Expansion Act. This provision is exclusively meant for national security threats. Yet, the President has acknowledged that the real purpose of this action is to combat currency manipulation -- which does not pose a national security threat. Furthermore, even if this action were legitimate, the statutory window for imposing these tariffs has closed. These actions further underscore that Congress should take up my legislation that would reassert congressional authority regarding imposition of national security tariffs.”
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Senate Finance Committee Chairman Chuck Grassley, R-Iowa, speaking to reporters Dec. 3, denied that he's abandoned the reform legislation that Toomey mentioned. He said that because Toomey and Sen. Rob Portman, R-Ohio, have not been able to agree on an approach to reforming Section 232, he's waiting for the top Democrat to be ready to move, since a divided Republican caucus on the committee means Democratic votes are needed to move a bill out of the committee. "I think there’s some questions about the president’s use of 232 for currency manipulation, and I think we’ve got to work those things out, and I think there’s some other players -- CIT and others -- that are raising questions about this," he said, referring to the Court of International Trade's remarks on the hike in Turkish steel tariffs (see 1911180013).
He said that there is no evidence that Brazil and Argentina are deliberately weakening their currencies so that their commodities are more competitive in China. "We’ve got reason to believe that maybe they are actually [doing] just the opposite, that they’re doing everything they can to prop up their currency by selling dollars," Grassley said.
Bilateral talks appear the most likely avenue for Brazil and Argentina to respond to the tariffs. Technical teams in Brazil have been meeting with their counterparts at the Commerce Department and the Office of the U.S. Trade Representative, who were also surprised by the decision to re-impose tariffs, said Renata Vargas Amaral, senior international adviser at BMJ, a Brazilian consultancy. Another option would be a challenge at the CIT, said Shunko Rojas, Argentina’s former undersecretary for international trade and a current partner at Quipu Advisors. Amaral and Rojas were speaking on a Dec. 3 call hosted by the Atlantic Council.
Re-imposition of the tariffs on Brazil especially could have consequences for downstream manufacturers in the U.S. Brazil is the largest supplier of semi-finished steel to the U.S., with 89 percent of Brazilian exports used as inputs for the U.S. steel industry, Amaral said. The other 11 percent of Brazilian exports represents less than 2 percent of U.S. imports of finished steel products, she said.
Overall, the U.S. is the second-largest export destination for both Brazil and Argentina, and steel and aluminum products make up a large portion of those exports, respectively, said Jason Marczak, director of the Atlantic Council’s Latin America Center. But retaliatory tariffs are unlikely to be imposed by Brazil, Amaral said, given the country’s as yet unrequited hopes to sign a free trade deal. And retaliation is also not a possibility for Argentina, which is currently in the midst of a deep recession, Rojas said.