Steel and Aluminum Tariffs: Trade War With Allies, WTO Violations, Economic Disruption
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The Section 232 tariffs were challenged immediately as legally dubious — U.S. national security law did not contemplate allies as threats, and Canada, Germany, South Korea, and Japan supply steel and aluminum to U.S. defense contractors. The EU, Canada, and Mexico all retaliated with targeted tariffs on politically sensitive U.S. products (Bourbon, Harley-Davidson motorcycles, orange juice, soybeans). The broader China trade war — separate from the steel tariffs — involved escalating rounds of tariffs reaching 25% on $250 billion in Chinese goods; China retaliated against agricultural products; the U.S. government paid $28 billion in direct payments to American farmers to compensate for lost Chinese export markets.
Overview
Trump imposed 25% tariffs on steel imports from close military allies and called it a national security measure. Canada, Germany, and Japan supply steel to U.S. defense contractors. Calling allied nations national security threats in order to invoke trade law authority was a legal theory that most trade lawyers found implausible.
The WTO agreed. It didn't matter much.
The "National Security" Theory
Section 232 of the Trade Expansion Act allows the president to impose tariffs for national security reasons. It was designed for scenarios like a hostile nation cutting off access to strategic materials.
Trump's team applied it to Canada — which shares the world's longest undefended border with the United States, which is in NATO, which has fought alongside the U.S. in every major conflict since World War I. Canadian Trade Minister Freeland called the argument "absurd." U.S. Senate Republicans agreed.
The Retaliation
Allied governments are not passive. Canada, Mexico, and the EU designed their retaliatory tariffs with precise political targeting: Bourbon comes from Kentucky (Mitch McConnell's state), Harley-Davidsons are made in Wisconsin (a key swing state), orange juice is from Florida, soybeans are from the Midwest. The tariffs mapped the Electoral College.
The Farm Subsidies
The China trade war cost American farmers their largest export market. To compensate, the U.S. government paid $28 billion in direct agricultural subsidies — more than the 2009 auto industry bailout. The money came from tariff revenue. Tariff revenue comes from American importers. American importers pass costs to American consumers.
The tariffs were a tax on Americans paid partly back to farmers for the harm the tariffs caused.
Timeline
Sequence of events
March 1, 2018
Trump announces 25% steel / 10% aluminum tariffs on allies
Trump announces tariffs on steel (25%) and aluminum (10%) under Section 232, applying them to nearly all trading partners including allies Canada, EU, Japan, and South Korea. The legal theory — that allied imports pose national security threats — is widely challenged.
June 1, 2018
Allies impose retaliatory tariffs on U.S. products
Canada, Mexico, and the EU impose retaliatory tariffs targeting politically sensitive American products: Bourbon, Harley-Davidson motorcycles, orange juice, soybeans. Chosen to maximize political pressure.
June 1, 2018
Harley-Davidson announces manufacturing shift to avoid tariffs
Harley-Davidson announces it will shift some production overseas to avoid European retaliatory tariffs. Trump attacks the company on Twitter.
July 6, 2018
US-China trade war begins with $34B in tariffs
The U.S. imposes $34 billion in tariffs on Chinese goods; China immediately retaliates. The trade war escalates through multiple rounds reaching $250 billion in U.S. tariffs on Chinese products.
August 27, 2019
US pays $28 billion to farmers — larger than auto bailout
The U.S. government announces it will pay $28 billion in emergency agricultural subsidies to farmers who lost Chinese export markets. The payment is funded by tariff revenue.
Sources
- ↑ Trump Imposes Tariffs on Steel and Aluminum — The New York Times
- ↑ Trump's trade war: tariffs on allies, China dispute, farmer losses — The Washington Post
- ↑ US tariffs on allies trigger retaliation, WTO challenge — The Associated Press
- ↑ WTO Panel: US Section 232 steel/aluminum tariffs inconsistent with WTO rules — World Trade Organization archived ✓
Verification