U.S. President Donald Trump speaks at the White House on March 8, 2018.Leah Millis/Reuters
U.S. President Donald Trump said Monday that he would impose tariffs on steel and aluminum from Brazil and Argentina, a move that would shatter previous agreements with those countries and widen a global trade war that the president had appeared ready to scale back.
Mr. Trump, in a message on Twitter, accused Brazil and Argentina of manipulating their currencies and hurting American farmers. “Therefore, effective immediately, I will restore the Tariffs on all Steel & Aluminum that is shipped into the U.S. from those countries.”
The Trump administration cannot restore tariffs because it never imposed them on Brazilian and Argentine metals, though it did force them to limit shipments to the United States under a quota system last year. The United States exempted Brazil, Argentina and other countries from the President’s sweeping metal tariffs in March, 2018, with the United States saying it would continue negotiations with those countries to improve their trade terms. In May, 2018, the United States announced that it had reached an agreement with the countries that would cap their metal shipments at a specific volume each year.
But the President’s move suggested that neither previous agreements nor political alliances could protect a country from sudden trade confrontations with the United States. Economic struggles – such as those confronting Brazil and Argentina – also appeared to be no defence. Mr. Trump’s announcement was particularly jarring to Brazil’s conservative populist president, Jair Bolsonaro, who had gone to great lengths to strengthen ties with the Trump administration, with little to show for it.
“Aluminum?” Mr. Bolsonaro asked when reporters presented him with Mr. Trump’s tweet. “If that’s the case, I’ll call Trump. I have an open channel with him.”
Dante Sica, Argentina’s Minister of Production, called the move “completely unexpected.”
“I was in Washington last week, and I talked to a lot of people, and there was no sign whatsoever that there would be any kind of change,” he said.
It is unclear what prompted Mr. Trump to reverse previous agreements. But last week the Brazilian currency, the real, fell to a record low against the dollar after the country’s Economic Minister signalled that he was not concerned about exchange-rate fluctuations.
Argentina’s peso has weakened with the country in the midst of an economic crisis.
Both economists and government officials have rejected the idea that Brazil and Argentina are manipulating their currencies. But those currency movements have made Brazilian and Argentine goods cheaper to purchase abroad, a dynamic that is particularly important for the agricultural sector and the U.S.-China trade war.
China is a major purchaser of U.S. pork, soybeans and other agricultural goods. As the United States and China have slapped tariffs on each others’ products in a year-long trade war, China has shifted to purchasing products from Brazil and Argentina instead, a move that has rankled Mr. Trump and other U.S. officials.
“I gave them a big break on tariffs, but now I’m taking that break off because it’s very unfair to our manufacturers and very unfair to our farmers,” Mr. Trump told reporters Monday. “Our steel companies will be very happy, and our farmers will be very happy.”
As of Monday morning, neither the Office of the U.S. Trade Representative nor the Commerce Department had issued the formal notices that would put tariffs on Brazil and Argentina into effect.
If they are imposed, the tariffs stand to do considerable damage to South America’s two biggest economies at a time when Argentina is in recession and Brazil confronts high unemployment and anemic growth.
Stocks on Monday fell after economic reports suggested that the U.S. economy continues to face significant headwinds. The latest gauge of manufacturing activity from the Institute for Supply Management, a trade group, showed activity in the sector contracted for the fourth consecutive month in November.
The S&P 500 was down nearly 1 per cent shortly after 11 a.m., putting the benchmark index on track for its worst day since Oct. 8. The trade-sensitive tech sector was the worst-performing part of the index, falling about 1.7 per cent.
Mr. Sica scoffed at the claim that Brazil and Argentina have been deliberately devaluing their currencies.
“Our currency has a flexible exchange rate and adapts itself to global changes,” he said.
Brad Setser, a senior fellow for international economics at the Council on Foreign Relations, said neither Brazil nor Argentina are manipulating their currency. He added that Argentina is in a “full blown” economic crisis and is close to running out of foreign exchange reserves, after selling foreign currency to try to support the value of the peso over the last year.
Any new tariffs would likely face legal challenges, however.
The President imposed the tariffs to stop a flood of imported steel and aluminum that his administration has claimed threatens American producers and thus U.S. national security. The idea has been disputed, with several countries bringing cases against the United States at the World Trade Organization.
And in a recent decision, the U.S. Court of International Trade, a federal court, ruled that Trump could not raise tariffs on steel exports from Turkey because a 180-day deadline set for that decision had already elapsed.
Jennifer Hillman, a senior fellow for trade and international political economy at the Council on Foreign Relations, said the law that the president had used to issue the tariffs, Section 232 of the Trade Expansion Act of 1962, did not give him the authority to alter tariffs outside of certain time limits.
“Trump cannot legally convert the current quotas to tariffs,” she said. “Changing a quota to tariff more than a year and a half after the original action is outside those limits.”