By: Vienna Chan
In March 2018, then-President Donald Trump established U.S. import duties of “25% on steel and 10% on aluminum against most countries,” citing foreign steel and aluminum was a threat to U.S. national security.[1] The former Trump Administration declared that cheap metals “flooding into the United States, particularly from China,” would degrade the American industrial base and in turn, would threaten the U.S.’ economic security.[2] Congress derives the power to levy tariffs from Article I, Section 8 of the U.S. Constitution; however, through the Reciprocal Tariff Act of 1934, Congress delegated the majority of its authority to impose tariffs to the Executive Branch.[3] This leaves Presidents “considerable discretion to increase tariffs.”[4] However, the Reciprocal Tariff Act of 1934 was “limited by statutorily prescribed time periods” in which the President’s powers to set tariff rates were subject to “periodic review and renewal.”[5] Congress reevaluated Presidential Powers in the Trade Act of 1974 and it did not delegate the President a general or specific authority to “modify tariff rates outside the confines of particular trade agreements.”[6]
Many of the U.S.’ trade partners, and China specifically, challenged the U.S. tariffs with the World Trade Organization (WTO) as the tariffs made the cost of U.S. steel and aluminum exponentially increase for foreign purchasers.[7] A panel at the WTO found that the U.S.’ steel and aluminum tariffs are inconsistent with international trade obligations, under Article XXII of the 1994 General Agreement on Tariffs and Trade (GATT).[8] However, the WTO’s finding is unlikely to have any real-world impact because as of late December 2019, the Obama and Trump Administrations have refused to appoint new judges onto the panel when the existing judge’s terms expired.[9] The U.S. maintains that the WTO’s Appellate Body has exceeded the scope of its authority and demands structural reforms before it appoints a new judge.[10] The WTO’s Appellate Body is inoperative since the appointment of a new judge requires a unanimous vote rather than a majority opinion by WTO member states.[11]
Former President Trump’s “America First” trade policies have sustained popularity amongst U.S. steel and aluminum producers even after Trump’s presidential term, tasking the Biden Administration to find a delicate balance between U.S. foreign trade relations and domestic labor interests.[12] As of early 2023, the Biden Administration has reversed some of the tariffs and attempted to repair trade relations with certain countries, but progress has been slow.[13] Nevertheless, the current Administration’s actions have shown the U.S. “remains undeterred in using the security exception to shield from WTO sanction measures.”[14]
The non-functioning aspect of the WTO’s Appellate Body places litigation over the U.S. imposed tariffs in limbo.[15] This is a benefit for U.S. steel and aluminum producers as foreign countries looking to import U.S. steel and aluminum must either pay the 25% or 10% tariffs, or not import U.S. products.[16] This satisfies domestic steel and aluminum producers as it virtually eliminates foreign competition in the U.S. steel and aluminum market.[17] The U.S. cites this elimination of competition as a way to bolster its national economic security.[18] However, the tariffs also create a precarious imbalance in addressing foreign and domestic interests and setting a precedent that there is no recourse for violating multilateral trade agreements such as the GATT.[19] Blocking the function of the WTO’s Appellate Body remains advantageous for the U.S. as most of the tariffs are still in place. Assuming the Appellate Body upholds the holding that the U.S. is in violation of GATT, unblocking the Appellate Body could force the U.S. to repeal the tariffs. However, since the U.S. “has brought the most offensive disputes of any WTO member and has won an overwhelming number for the benefit of American companies and workers,” this is unlikely.[20]
While the steel and aluminum tariffs were first imposed by the Trump Administration, in reluctantly overturning the tariffs for certain countries, the Biden Administration has continued the Trump-era notion that the U.S. violates major multinational trade agreements.[21] The Biden Administration should repeal all Trump-era steel and aluminum tariffs to both strengthen the U.S. economy, create jobs, and rectify US trade relations globally.[22] The tariffs have arguably decreased manufacturing competition domestically; producers and manufactures have experienced drastic reductions in exports due to rise in input costs relating to the tariffs.[23] Moreover, the steel and aluminum tariffs have negatively impacted other industries like the beverage industry “whose costs [rose] by $1.4 billion in early 2022.”[24] Therefore, not only do the U.S. steel and aluminum tariffs set harmful precedents in international trade practices, but they also have negative “unintended consequences on American industries and consumers.”[25]
[1] Nick Lazzaro, WTO Finds US Steel, Aluminum Duties Violate Trade Rules, S&P Global (Dec. 9, 2023), https://www.spglobal.com/commodityinsights/en/market-insights/latest-news/metals/120922-wto-finds-us-steel-aluminum-duties-violate-trade-rules.
[2] See Ana Swanson, Trump to Impose Sweeping Steel and Aluminum Tariffs, N.Y. Times (Mar. 1, 2018), https://www.nytimes.com/2018/03/01/business/trump-tariffs.html.
[3] Id. See also Emily Loftis, Who has the Authority to Impose Tariffs and how does this Affect International Trade, Yeutter Inst. (May 2019), https://yeutter-institute.unl.edu/who-has-authority-impose-tariffs-and-how-does-affect-international-trade
[4] Id. See also Reciprocal Trade Agreement Act of 1934, 19 U.S.C. § 1351.
[5] Brandon J. Murrill, Cong. Rsch. Serv., Presidential Authority over Trade: Imposing Tariffs and Duties (2016).
[6] Id.
[7] See Panel Report, United States–Certain Measures on Steel and Aluminum Products, WTO Doc. WT/DS544/R (adopted Dec. 9, 2022).
[8] Lazzaro, supra note 1. See also General Agreement on Tariffs and Trade 1994, Apr. 15, 1994, Marrakesh Agreement Establishing the World Trade Organization, Article XXII, (1994).
[9] Chimène I Keitner, International Law Frameworks, at 225 (5th ed. 2021).
[10] Id.
[11] See Paul Wiseman, WTO Rules Against Trump’s Steel and Aluminum Tariffs, AP News (Dec. 9, 2022), https://apnews.com/article/europe-business-china-japan-donald-trump-2d3985888eaaec782e38dd9e05c7bb0e.
[12] Id.
[13] Darrel H. Pearson, U.S. Steel and Aluminum Tariffs Ruled WTO-Inconsistent but U.S. Refuses to Remove the Measures Citing National Security Concerns, Bennet Jones Blog (Feb. 14, 2023), https://www.bennettjones.com/Blogs-Section/US-Steel-And-Aluminium-Tariffs-Ruled-WTO-Inconsistent-But-US-Refuses-To-Remove-The-Measures.
[14] Id.
[15] Wiseman, supra note 7.
[16] Lazzaro, supra note 1.
[17] Swanson, supra note 2.
[18] Id.
[19] Lazzaro, supra note 1.
[20] Brown & Keynes, Why did Trump end the WTO’s Appellate Body? Tariffs., Peterson Instit. for Int’l Econ. (March 4, 2020, 11:30 AM), https://www.piie.com/blogs/trade-and-investment-policy-watch/why-did-trump-end-wtos-appellate-body-tariffs.
[21] Pearson, supra note 7.
[22] Alex Durante, How the Section 232 Tariffs on Steel and Aluminum Harmed the Economy, Tax Found. (Sept. 20, 2020), https://taxfoundation.org/research/all/federal/section-232-tariffs-steel-aluminum/#_ftn19 (citing that the tariffs “are taxes on imports and raise the cost of production . . . repealing the tariffs would strengthen the U.S. economy and create jobs.”).
[23] Id.
[24] Id. (explaining steel and aluminum manufacturing have experienced short run boosts in employment but has caused the detrimental price increases for steel and aluminum purchasers, domestically and internationally).
[25] Id.
