Earlier this year President Trump approved hefty tariffs on residential washing machines suggested by U.S. Trade Representative Robert Lighthizer. While some action was expected, the industry was surprised by a move to extend the high tariffs to washing machines produced in the United States.
This move to place tariffs on components had the effect of “moving the goal posts” and even apply to washers produced in Foreign-Trade Zones. Producers such as Samsung had committed hundreds of millions of dollars to build U.S. plants. Samsung says it will use imported parts until its factory runs at full capacity and becomes ready to produce key parts, expected to be by the end of the year. Until that happens, the company will pay hefty tariffs on its key components.
The tariffs exceeded the harshest recommendations from ITC members, with a 20 percent tariff set on the first 1.2 million imported large residential washers in the first year, and a 50 percent tariff on additional imports. Washington also imposed a 50 percent tariff on imported key parts in excess of 50,000 units in the first year, a move Samsung’s South Carolina plant manager fears could “cut us off at the knees”.
“Although we are installing production equipment and we are committed to producing the major parts in-house, there will be a transition period during which importing parts will be necessary to successfully launch this facility,” Tony Fraley, Samsung’s plant manager, told the commission in October.
The safeguard issue is set to top the agenda when government officials from the two countries meet later this week to discuss trade issues. South Korea has already filed challenges and demands for compensation at the World Trade Organization.
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Earlier this month the Trump Administration declared imports of steel and aluminum from China and other nations to be a threat to national security, setting the stage for President Trump to impose punitive tariffs on both commodities. In a report released just last week, the Commerce Department said a recent influx of foreign metals pose a risk to national security by threatening the viability of American defense manufacturers who require continuous access to supplies of those metals.
Possible action includes a dramatic 24% on steel import from all countries. These recommendations by Commerce give the President authority to decide the scope and severity of any trade action by mid April. The President has previously expressed his belief that tariffs on steel and solar cell imports are crucial to protecting American companies. Industry remains concerned that any attempt to create barriers would prompt swift retaliation from U.S. trading partners, including China and the European Union, which have already warned of reciprocal action in response to any action.
Secretary of Commerce Wilbur Ross outline three alternatives for the President to choose from: a broad 24% tariff on all steel imports, or a targeted 53% tariff on steel products from 12 countries, including China, Brazil, India, South Korea, Vietnam. Under this option, imports from all other countries would be limited to the level they imported in 2017. The Secretary also proposed an option that included no tariffs, but would limit steel imports from all countries to roughly 2/3 the level of last year.
For aluminum, the Secretary again outlined three options, including a flat 7.7% tariff on imports from all countries, or a targeted 23.6% tariff on aluminum from China, Hong Kong China Venezuela, or Vietnam. The third option involves putting into affect quotas to limit aluminum imports to lower levels them were shipped to the United States last year. These options are suggestions, and are not binding to the President, leading to broad speculation on how he might act before the April deadline.
The Trans-Pacific Partnership is once again getting positive coverage from the Trump administration, and this time it came from a most unusual source. Last week, U.S. Treasury Secretary Steven Mnuchin said that the United States is disgussing re-joining the 12-nation trade agreement.
Secretary Mnuchin, speaking at an investment summit meeting sponsored by the U.S. Chamber of Commerce, said that renegotiating the trade agreement was on the table and that he had been in talks with other countries about what it would take for the United States to reverse course on this 12 country agreement.
“I’ve met with several of my counterparts and other people and we have begun to have very high-level conversations about TPP” Mr. Mnuchin said, adding that President Trump still prefers one-on-one trade agreements. “It’s not a priority at the moment, but it something the President will consider.”
Last month we reported that the president had open the door to taking another look at TPP during the World Economic Forum in Davos, Switzerland. It is not clear why the administration would suddenly be sending trade policy signals through Secretary Mnuchin, whereas in the past Secretary of Commerce Ross or United States Trade Representative Lighthizer have taken the lead in trade policy and negotiations.
It remains to be seen how long Secretary Mnuchin my play an active role in trade negotiations, and whether the Trump administration will continue to pursue eliminating import tariffs through a new free-trade agreement, while at the same time taking a dramatically hard line with respect to import tariffs on items such as steel, aluminum, washing machines, and solar panels.
Stuck in the Senate, my true love.
Many U.S. manufacturers had pinned hopes of tariff relief on the new process for passing a Miscellaneous Tariff Bill (MTB) in Congress. The last successful MTB was passed over 8 years ago and expired in 2012. Since then, the MTB has had a storyline that reads like a Shakespearean tragedy.
The first bill using the new, non-partisan vetting process passed in the House on January 16th of this year, but has yet to be even scheduled for a vote in the Senate. The FTZine understands this first MTB will not be retroactive, so any tariff relief or reduction in the bill will only go into effect after the President actually signs the legislation. This has left many manufacturers in a bind for which other duty-relief programs, such as Foreign-Trade Zones, may be the only reliable option.