In the wake of President Donald Trump’s announcement that the U.S. will impose heavy tariffs on foreign steel and aluminum imports, The Wicks Group (TWG) Partner and Vice President Roncevert Almond appeared on China Global Television Network (CGTN) last week to discuss the state of U.S.-China economic relations.
During the interview, Mr. Almond explained that many Americans have a negative view of the United States’ trade relationship with China, pointing out that a key theme of Mr. Trump’s 2016 presidential campaign was criticism of America’s existing trade agreements and trade with China, in particular.
“Americans tend to have a misperception on the role of trade in their lives,” Mr. Almond explained. “The benefits of trade are borne by everyone, but sometimes imperceptively, in terms of consumer products that they might buy at the store. But the costs are borne by visible constituents. So, if you’re a steel worker in Pennsylvania and you lose your job, you’re not going to think about that cheap washer that you bought at Walmart.”
As an example of the misperception of international trade’s benefits to the U.S. economy, Mr. Almond cited the United States’ widening trade deficit with China.
“The trade deficit between China and the United States has increased over the last year during the Trump Administration,” he explained, “but the reason for that trade deficit is American prosperity. It’s because Americans have more money to spend on consumer goods. So there’s a misperception on what our relationship truly is.”
Asked to what degree China would retaliate to the increased tariffs, Mr. Almond pointed out that while the United States accounts for only a small percentage of the less-than 0.5% of Chinese GDP generated by steel and aluminum exports. Nevertheless, the White House’s decision to impose duties of 25% on steel and 10% on aluminum to counter cheap imports from abroad indicates a potential new trend in international trade where issues such as national security are invoked to curtail or limit foreign trade. Major United States trading partners, from the European Union to China, are considering reciprocal actions, including targeted tariffs and duties on U.S. imports.
The new U.S. tariffs follow investigations by the U.S. Department of Commerce on the effects of steel and aluminum imports on U.S. national security. In authorizing the investigations in April 2017, President Trump relied upon an obscure statutory provision, Section 232(b) of the Trade Expansion Act of 1962 (19 U.S.C. 1862(b), which provides the President, in consultation with other government officials, such as the Secretary of Defense, discretion to impose restrictions on imports, such as tariffs or quotas, on the basis of protecting U.S. national security.
Affected countries may seek to challenge the U.S. tariffs before the World Trade Organization. The Trump administration, in turn, may invoke the security exception under Article XXI of the General Agreement on Tariffs and Trade (GATT), which permits WTO members to take “any action which it considers necessary for the protection of its essential security interests” but only under specific circumstances.
As Mr. Almond noted during the interview, this may lead to new precedent, as this provision has not been fully tested since the founding of the WTO. Even under U.S. legal precedent, President Trump’s action is rare. According to the Peterson Institute for International Economics, since 1962, the United States has conducted only 28 investigations under Section 232, and the last restrictions imposed by the U.S. under the law occurred over 30 years ago.
The Wicks Group has broad experience providing legal, regulatory and technical assistance services to commercial entities and government authorities throughout the world. This experience includes advising on issues of compliance with U.S. and international legal standards related to trade. For more information about TWG’s legal and consulting services, please contact Roncevert Almond at ralmond@wicks-group.com.