U.S. Tariffs Make More Waves on Steel, Auto Fronts
Higher import tariffs, potential or already realized, continue to make waves in the U.S. On Wednesday, a U.S. group that represents users of imported steel filed a lawsuit challenging the constitutionality of the steel tariffs. Meanwhile, a U.S. auto manufacturing group warned that a potential 25% tariff on imported vehicles and vehicle components would amount to a $45 billion tax on domestic consumers.
The American Institute for International Steel (AIIS) said it and two member companies filed a lawsuit challenging the constitutionality of the law that enabled the Trump administration to put a 25% tariff on imported steel. Industrial Info is tracking more than $16 billion worth of active steel projects in the U.S. For more information, see May 7, 2018, article - How Will Tariffs Hit the U.S. Steel Industry? Ask Our Expert.
The AIIS alleges section 232 of the Trade Expansion Act of 1962 violates the constitutional prohibition against Congress delegating its legislative powers to the president. According to the AIIS, Section 232 allows the president "to impose unlimited tariffs or create other trade barriers at his unfettered discretion if he believes they are needed" to protect national security.
"In addition to the totally open-ended choice of how to counter any threat that imports may present, Section 232 allows the president to consider virtually any effect on the U.S. economy as part of 'national security'," said AIIS President Richard Chriss in a press release. "Unlike most cases brought against actions of the Trump administration, it is Congress - through its delegation of unfettered discretion to the president in this statute - and not the President that is the violator of the Constitution," said AIIS lead council Alan Morrison.
A sharp increase in the price of imported steel, as well as a reduction in steel imports, hurts a variety of U.S. businesses, ranging from manufacturers to port operations, according to the trade group. The lawsuit was filed in the United States Court of International Trade in New York City.
According to its website, one of the AIIS board members is the chief commercial officer of Port Houston, where steel shipments make up a significant part of its business. The port authority reported in April that overall steel tonnage that passed through the port in first-quarter 2018 was up 14% at 875,000 tons, compared with the same period last year, and that steel imports had grown by 11%. Industrial info is tracking $173 million in active Port of Houston Authority projects.
And while it may seem counterintuitive amid the tariff actions, the AIIS reported earlier in June that U.S. steel imports increased 12.7% from March to April to 3.76 million net tons. April's total was 12.1% higher than the monthly total a year earlier. Month-on-month gains were seen for steel imports from Canada, the European Union, South Korea and Russia.
The AIIS said the increases "are hardly surprising, given President Trump's March announcement of 25% tariffs on steel, with temporary exemptions for Canada, the European Union and certain others. Businesses were stocking up as much as they could. With the exemptions expiring on June 1, the numbers will probably be similar in May, followed by a sharp drop-off."
The domestic steel industry has generally lauded the import tariffs, and a number of U.S. steel producers have announced plans for expansions and upgrades. For more information, see June 28, 2018, article - Tariffs Boost U.S. Steel Companies' Expansion Plans.
And on the auto front...
Also on Wednesday, the Alliance of Automobile Manufacturers (the Auto Alliance) warned that a 25% tariff on imported autos and auto parts that is under consideration by the Trump administration would amount to a $45 billion tax on U.S. consumers. According to the lobbying group, such a tariff would boost the average price of an imported vehicle by $5,800.
Consumers would also face higher costs from tariffs on imported auto parts when buying vehicles from both domestic and international automakers, according to the trade group. The U.S. imported over $270 billion worth of finished autos and auto parts in 2016.
The tariff also would expose the U.S. auto industry to retaliatory tariffs by other countries, according to the Auto Alliance. More than $99 billion of autos and auto parts were shipped from U.S. ports to more than 88 countries in 2017, the trade group said.
President Donald Trump asked Commerce Secretary Wilbur Ross in May to investigate whether auto imports pose a national security threat.
"There is evidence suggesting that, for decades, imports from abroad have eroded our domestic auto industry," Ross said in a press statement in May. "The Department of Commerce will conduct a thorough, fair and transparent investigation into whether such imports are weakening our internal economy and may impair the national security."
During the past 20 years, imports of passenger vehicles have grown from 32% of cars sold in the U.S. to 48%, according to the Department of Commerce. From 1990 to 2017, employment in U.S. motor vehicle production declined by 22%. American-owned vehicle manufacturers in the U.S. now account for only 20% of global research and development in the automobile sector, and American auto part manufacturers account for only 7% in that industry, according to the department.
Industrial Info is tracking more than $34 billion in active U.S. automotive manufacturing projects.
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