3-8-18 4:15 PM EST | Email Article
By Jacob M. Schlesinger, Michael C. Bender and Peter Nicholas 

WASHINGTON -- President Donald Trump on Thursday signed proclamations imposing steep tariffs on steel and aluminum but granting the administration flexibility on the levels and the ability to spare critical U.S. allies.

When Mr. Trump and aides first announced plans a week ago to impose tariffs of 25% on steel and 10% on aluminum imports, they said in the following days that those numbers were fixed and that no countries would be excluded. The goal, they said, was to give hard-hit domestic producers sufficient protection from foreign competition to ensure their long-term health, a condition the White House deems vital for American national security.

But both Mr. Trump and a senior administration official, speaking Thursday morning ahead of the 3:30 p.m. announcement, indicated that the planned tariff policy had evolved significantly during fierce internal debates over the past few days, as well as warnings from close military allies that blocking their exports could undermine their relations with the U.S.

The details of the tariffs now appear dependent on negotiations with allies likely to unfold in the coming weeks and months.

Both Canada and Mexico would be exempt from the outset, though their continued exemption would be contingent on the outcome of ongoing negotiations to rewrite the North American Free Trade Agreement as well as broader talks about security ties among the neighbors, the senior administration official told reporters ahead of announcement.

"We're going to be very flexible," Mr. Trump said at the outset of a cabinet meeting at the White House Thursday. In addition to repeating his willingness to exempt Mexico and Canada, the president for the first time suggested there could be a carve-out for Australia, a U.S. ally he called a "great country" and a "long-term partner."

"We'll be doing something with them," he said of Australia. "We'll be doing something with other partners."

Mr. Trump also said the 25% and 10% numbers could be adjusted for specific countries.

Both Mr. Trump and the aide repeatedly used the word "flexible" to describe a policy that a week earlier had been described as strict and ambitious in its goal of blocking a significant amount of imports.

"This is a wonderfully flexible document," the administration official said, referring to the two proclamations. Asked if the White House was watering down its policy, he responded, "This is not a softening of our position in any way whatsoever."

He added, "We have structured these proclamations in ways which are unequivocally designed to defend our steel and aluminum industries." The proclamations, he added, will "allow us to deal with the security relationships we have."

The official didn't explain the process by which allies could seek exemptions, nor what considerations would factor into the decision to grant exemptions or tariff reductions. But it is likely that a long list of U.S. allies will seek exemptions, notably North Atlantic Treaty Organization members in Europe, and Japan and South Korea.

South Korea will pose a particularly nettlesome challenge, since administration trade officials consider it one of the worst offenders in dumping into the U.S. cheap steel products originating from China, while administration security officials consider it a crucial ally in combating North Korea's nuclear weapons program.

The administration official did say that the White House remained committed to blocking a fixed amount of steel and aluminum from flowing into the country. So for every country given relief from the plan, the burden may have to be increased on the rest of the world.

"If Canada and Mexico were to be excluded, we would perhaps maybe have to raise tariffs on everybody else to ensure our steel and aluminum industries are defended," the official said. He didn't say how high those tariffs would need to go. But when the Commerce Department last month gave Mr. Trump a series of options for carrying out the policies, one option presented was to spare most military allies and then impose a 53% tariff on 12 countries ranging from Brazil to China and Egypt.

Canada and Mexico were, respectively, the first and fourth largest sources of foreign steel in the U.S. in 2017, together accounting for one-fourth of all steel imports, according to a Commerce Department study conducted for the policy. The two countries ranked first and 11th in aluminum imports, accounting for 43% of foreign supplies, Commerce said.

In signing the tariffs, Mr. Trump is carrying out one of his core campaign promises, first unveiled in Pennsylvania steel country in June 2016. His vows to leverage trade policy to protect American workers contributed to his surprise victory in the industrial Midwest, and he has regularly credited it with winning him the White House. "Promises made, promises kept," the administration official said Thursday morning.

In a sign of the political implications of the announcement, Mr. Trump was scheduled to hold a signing ceremony in the White House Roosevelt Room Thursday, surrounded by supportive steel and aluminum workers, a week after he held a similar meeting with industry executives where he first announced the broad outlines of the policies.

Despite rhetoric about protecting American jobs, White House officials say the tariffs are crucial to U.S. national security, and are grounding them in a rarely used law authorizing tariffs to protect industries critical to national security.

The White House issued a fact sheet shortly before the announcement noting that "steel is required for a range of aircraft carriers, amphibious force ships, submarines, tanks, and light armored vehicles," while aluminum is used in a "range of ground weapons and aircraft."

Officials say the policies are already resuscitating the hard-hit steel industry, citing an announcement Wednesday by United States Steel Corp. that it will restart a blast furnace in Illinois and call back to work 500 employees.

And the White House has spent the past week minimizing any possible economic fallout from the moves, saying the benefits would far outweigh the costs on industries using steel and aluminum.

"There will be no significant price effects...or job effects downstream, " the administration official said Thursday. "This is simply fake news."

He said there would be "very, very, very small costs associated with these tariffs." He said the moves would add "a cent and a half to two cents" the costs of "a six-pack of soda or beer" made from aluminum cans.

Outside economists, business groups and metal-using industries have been far more dire in their forecasts.

"Trump steel tariffs could kill 45,000 auto jobs, equal to one-third of steel workforce," was the title of a blog item posted by Council on Foreign Relations analysts shortly before the announcement.

Beyond the immediate impact on the U.S. business and consumers, many economists and diplomats have been warning over the past week of a looming trade war marked by swift retaliation from trading partners that would crimp U.S. exports. The European Union has already warned it was ready to slap tariffs on American motorcycles, blue jeans, and bourbon.

And many free-traders worry about the longer-term impact on the world trading system, with the U.S. -- once the leading advocate of advancing free trade -- now seen as attacking it.

As a symbol of the shifting dynamics, 11 Pacific Rim countries signed a new regional free-trade agreement in Chile just half an hour before Mr. Trump was scheduled to sign his new tariff orders. Under President Barack Obama, the U.S. spearheaded that pact, dubbed the Trans-Pacific Partnership. But Mr. Trump, on his first working day in office, pulled the U.S. out, asserting the pact was fundamentally flawed and detrimental to the U.S.

American free-trade advocates were chagrined at the anticipated split-screen image: U.S. allies signing a new trade pact while the U.S. president unveiled new tariffs.

"While the TPP countries have today signed an agreement tearing down trade barriers, President Trump and his trade team are hard at work raising them," said Daniel Price, a senior White House economic aide in the George W. Bush administration. "The U.S. is increasingly isolated," he added. "Is this what winning looks like?"

"From a Canadian perspective, there's never been a better time to diversify," Canadian Trade Minster François-Philippe Champagne told reporters before the TPP signing. "The economic center of the world is shifting somehow towards Asia, so we need to be prepared."

The tariffs have been contentious at home as well, roiling Mr. Trump's own White House and drawing fierce criticism from members of Congress from his own Republican Party.

As the tariff policy was nearing completion, Gary Cohn, the director of the White House National Economic Council, announced his resignation Tuesday. Mr. Cohn, a former president of Goldman Sachs Group Inc. and the leader of the faction of free-traders inside Mr. Trump's divided administration, had strongly opposed the tariffs but lost the fight against the president's economic nationalist aides. Those included White House trade adviser Peter Navarro and Commerce Secretary Wilbur Ross, the chief architects of the policy.

"There's no real stability or predictability about this," Kansas Republican Sen. Pat Roberts said shortly before the announcement. Mr. Roberts chairs the Senate Agriculture Committee, which oversees an export-dependent sector worried about becoming cannon fodder in a resulting trade war.

The new flexibility exempting allies "might be moving in the right direction, but it's still just a bad, bad move," said Sen. John Thune of South Dakota, a member of Senate GOP leadership. "It's just going to have bad consequences for us."

--Paul Kiernan in Santiago, Chile, and Siobhan Hughes in Washington contributed to this article.

(MORE TO FOLLOW) Dow Jones Newswires

March 08, 2018 16:15 ET (21:15 GMT)

Copyright (c) 2018 Dow Jones & Company, Inc.
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