Confusion over Trump rationale to impose steel tariffs on Brazil and Argentina

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President Trump’s announcement Monday that the United States would impose tariffs on metals from Brazil and Argentina on the basis that the countries have devalued their currencies had trade experts scratching their heads and searching for another explanation.

“It can be hard to discern exactly what motivates Trump’s trade policy decisions, but it is possible that concerns about the relatively friendly trade relations Brazil and Argentina have with China played a role here,” said Simon Lester, a trade policy expert for the free market Cato Institute.

Both South American countries had been excluded from worldwide tariffs of 25% on steel and 10% on aluminum that the White House instituted last year. On Monday, Trump said he would be rescinding the exclusions.

“Brazil and Argentina have been presiding over a massive devaluation of their currencies. which is not good for our farmers. Therefore, effective immediately, I will restore the Tariffs on all Steel & Aluminum that is shipped into the U.S. from those countries,” he tweeted.

The White House did not issue a statement or order regarding the tariffs. A Commerce Department spokesman declined to provide a comment to the Washington Examiner but pointed to comments Monday by Secretary Wilbur Ross that affirmed the tariffs were in place or shortly would go into effect.

Lester said that while the South American countries’ currencies have fallen relative to the dollar, there’s nothing nefarious behind the movements. “Their currencies are weakening for normal, market-related reasons, but that doesn’t constitute manipulation,” he said. One theory, he said, was that the announcement was meant as a signal to the South American countries to rein in their trade with China, thereby forcing Beijing to pay a higher cost for its tariffs on U.S. farm goods.

Neither country was cited by the Treasury Department in its recent report on countries that manipulate currencies. Trump’s claim with regard to Brazil drew particular skepticism since its currency, the real, is free-floating though country has made an effort last week to prop it up after it fell to record lows against the U.S. dollar.

“There’s no evidence that either country has manipulated its currency,” said Gary Hufbauer, a nonresident senior fellow at the Peterson Institute for International Economics.

Argentina, meanwhile, faces serious internal economic problems, noted Bryan Riley, a trade policy expert with the National Taxpayers Union. “The value of their currency has fallen because they are a failed socialist state and people are trying to unload their Argentine pesos, not because of some kind of grand trade strategy to gouge the United States,” he said.

Trump’s tweet making the announcement indicated that it was prompted by concern over agricultural competition. The White House is sensitive to the impact of the trade war on the domestic agriculture industry, a key part of Trump’s political base. It has made $28 billion in federal assistance available to farmers thus far to counter the effects of the trade war.

The White House praised Brazil earlier this month for allowing 750,000 metric tons of wheat imports a year duty-free.

Chad Bown, a trade policy senior fellow at the Peterson Institute, noted that while Argentina and Brazil were not subject to tariffs, that didn’t mean the U.S. didn’t already restrain their trade in other ways.

‘The status quo was NOT the Trump giving free trade to Argentina/Brazil steel and aluminum Argentina/Brazil faced binding import quotas limiting the volume of steel and aluminum each could sell in the US market,” he tweeted.

Instead, the two countries were subject to import quota agreements, called Voluntary Export Restraints, that effectively limited their U.S. exports, as tariffs would have otherwise done. The declines in the nations’ currencies effectively undermined those quotas. By instituting tariffs, Trump appears to be trying to restore the prior status quo in terms of the impact those countries’ imports had on the U.S. economy.

Others saw the Brazil and Argentina announcement as a warning shot to China to not manipulate its currency. Asked directly on Fox Business on Monday if that was the case, Ross did not directly respond but said the administration would apply the same rules to everyone.

“Even our friends must play by the rules. Our best allies must also live by the rules,” he said. “The lower their currency, the cheaper their products coming in. He [Trump] felt he had to do something about it. And they’re not the only one where there are currency issues. For the moment, I don’t know that China is such a bad problem with currency. But they have been in the past.”

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