Australia dodges Trump tariffs on metals, thanks to U.S. politicians

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WASHINGTON — The Trump administration considered imposing tariffs on imports from Australia last week, but decided against the move amid fierce opposition from military officials and the State Department, according to several people familiar with the discussions.

Some of President Donald Trump’s top trade advisers had urged the tariffs as a response to a surge of Australian aluminum flowing onto the U.S. market during the past year. But officials at the Defense and State departments told Trump the move would alienate a top ally and could come at significant cost to the United States.

The administration ultimately agreed not to take any action, at least temporarily.

The measure would open yet another front in a global trade war that has pitted the U.S. against such allies as Canada, Mexico, Europe and Japan, and deepened divisions with China. It would also be the end of a reprieve for the only country to be fully exempted from the start from steel and aluminum tariffs that Trump imposed in 2018.

The White House declined to comment. But the Trump administration has fiercely criticized past administrations for making concessions on trade policy to accomplish foreign policy goals. Trump has said the approach has left the United States in the position of subsidizing the world, weakening U.S. industry and pushing factories and jobs overseas, and has pledged to rework U.S. trading relationships.

But his decision to hit close allies with tariffs has also prompted an uproar. The Trump administration said it was imposing tariffs on steel and aluminum to strengthen U.S. national security, but critics argue that the approach strains relationships with allies that are far more important to U.S. defence.

The latest example came Thursday, when Trump abruptly announced he would also levy tariffs on Mexico to try to pressure that country to stem the flow of migrants across the United States’ southern border. The move has sent foreign officials and lawmakers on Capitol Hill scrambling to head off tariffs that could damage Mexican and U.S. businesses and threaten to derail a newly negotiated North American trade deal.

Shipments of Australian aluminum to the U.S. have surged since 2018, when Australia became one of the few countries not to face metal tariffs.

The tariffs on Australia would have hit imports of aluminum, although measures that would have applied to other products had been discussed as well. Shipments of Australian aluminum to the U.S. have surged since 2018, when Australia became one of the few countries not to face metal tariffs.

Trump imposed a 25 per cent tariff on imported steel and a 10 per cent tariff on imported aluminum from many countries last year. The move was an effort to shield U.S. producers from low-priced imports, which the administration said were a threat to the domestic industrial base and therefore national security.

Some countries, such as Brazil, Argentina and South Korea, won temporary exemptions on some of their imports, but ultimately agreed to limits on how much metal they could ship to the United States. But Australia’s full exemption appears to have been the work of Prime Minister Malcolm Turnbull, who reached a handshake deal with Trump in 2017 to avoid the tariffs. In August 2018, Turnbull lost the confidence of his party and was ousted from office.

Exempting Australia from tariffs effectively allowed Australian producers to sell cheaper metals to the U.S. than their competitors from Europe, North America and Asia. Aluminum imports from Australia rose by 45 per cent from 2017 to 2018. They are up even more, by 350 per cent, for the first three months of 2019, compared with the same period in 2018.


Australia’s new conservative prime minister, Scott Morrison.

Mick Tsikas /

AP

But Australia remains a relatively small supplier of aluminum to the United States, accounting for about six per cent of total imports so far this year, according to the U.S. Geological Survey.

Robert Lighthizer, U.S. trade representative, and Peter Navarro, director of the White House Office of Trade and Manufacturing Policy, were among the backers of tariffs on Australia. But other senior administration officials, who have cultivated ties to Australia, favour prioritizing other elements of the relationship.

For one thing, Australia has emerged as an important ally — perhaps the most critical one — in helping Washington constrain China’s influence in the Asia-Pacific region. Australian officials have banned the Chinese company Huawei from the country’s online networks, and have investigated the Chinese Communist Party’s influence and interference in Australia. Washington is also relying on Canberra to compete with the Chinese for political clout in the Pacific islands.

Furthermore, a conservative party won a general election in May in an upset, and Prime Minister Scott Morrison intends to enact conservative policies. That means Washington and Canberra are growing even closer, as some U.S. officials find more affinity with their Australian counterparts.

The Australian military has, over the years, joined important U.S. campaigns. Notably, Australia sent soldiers to Iraq to be part of President George W. Bush’s “coalition of the willing,” and to Afghanistan.

Tariffs against Australia could also have broader reverberations, serving as a warning to Canada and Mexico, which recently saw tariffs on steel and aluminum lifted as part of a bid to secure congressional approval of the renegotiated trade agreement with those countries that the president signed last year.

Instead of tariffs, Canada and Mexico agreed to set up a system for monitoring and enforcement for import surges into the United States. Under the agreement, the U.S. can reimpose tariffs on individual exports of 25 per cent for steel and 10 per cent for aluminum in the case of such surges.

Source: Financial Post

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