U.S. President Donald Trump announced on Monday that he will “restore” tariffs on steel and aluminum imported from Brazil and Argentina, drawing wide concern domestically and abroad.
“Brazil and Argentina have been presiding over a massive devaluation of their currencies, which is not good for our farmers,” Trump tweeted. “Therefore, effective immediately, I will restore the Tariffs on all Steel & Aluminum that is shipped into the U.S. from those countries.”
Shortly after the announcement, Brazilian President Jair Bolsonaro told reporters that he would discuss the issue with Economy Minister Paulo Guedes, and talk to the U.S. president directly if necessary. “I have an open channel with Trump.”
Calling the move “unexpected,” Argentine Minister of Production and Labor Dante Sica said “we still don’t know what this implies. We want to know the details and the scope of the announcement.”
The Brazil Steel Institute, which represents the interests of steel exporters, said in a statement that the new tariffs would hurt not only Brazilian companies, but also U.S. steel companies, as they would need the semi-finished products imported from Brazil.
According to data from U.S. Commerce Department, Brazil exported 13.9 million metric tons of steel in 2018, down 9 percent from the previous year, with the United States being one of its top three markets.
Amid strong opposition, Trump slapped tariffs on imported steel and aluminum globally last year citing national security concerns, defined under Section 232 of the Trade Expansion Act of 1962. Brazil and Argentina reached deals with the U.S. administration to put quotas in place in exchange for exemptions to steel and aluminum tariffs.
Trump’s conversion of Section 232 quotas on steel and aluminum from Brazil and Argentina is “illegal,” Jennifer Hillman, senior fellow for trade and international political economy at the Council on Foreign Relations, said in a tweet.
“No, Trump cannot legally convert quotas to tariffs under Section 232,” Hillman tweeted.
Trump’s accusation of “massive” currency devaluation also sparked strong backlash. Sica said Argentina has not been deliberately devaluing its currency, noting that the currency has a flexible exchange rate and adapts to changes in global circumstances.
Over the past year, Brazilian and Argentine currencies have significantly depreciated against U.S. dollar, about 8 percent and 37 percent respectively, but analysts said that the main reason is economic downturn rather than currency manipulation.
“U.S. tariffs will likely further undermine currencies, as well as prospects for the two countries,” said Monica de Bolle, senior fellow at the Peterson Institute for International Economics (PIIE).
Trump’s comment also contradicted the conclusion of U.S. Treasury Department, which said in its semi-annual report in May that no major trading partner of the United States meets the standard of currency manipulation.
Monday’s move marks “the first time” Trump has linked the imposition of tariffs explicitly to currency movements, according to a report from Bloomberg. “It signifies a potential new phase in his trade wars in which foreign-exchange markets are the battleground,” the report said.
“No one knows where any of this is going, but that’s Trump’s point,” said Chad Bown, senior fellow at the PIIE. “It’s another dose of uncertainty and a reminder that Trump is ready for a currency war on top of a trade war.”
Source: Xinhua – WASHINGTON