President Trump has many justifications for his tariffs: national security, pushing back on unfair trade deals, and protecting American manufacturing. Not on the list: playing favorites with Chinese imports over those from neighboring Canada. But through the convoluted exclusions process of U.S. tariffs, that’s exactly what has happened.
As the CBC reported, about 40 percent of U.S. imports of Chinese steel have been excluded from the 25 percent tariffs imposed by the Trump administration and 86 percent of imports of Chinese aluminum, otherwise subject to a 10 percent tariff, have been excluded.
For comparison, only 2 percent of U.S. imports of Canadian steel are free from tariffs and less than 1 percent of aluminum.
So how did this happen?
The problem begins with the easy sounding solution of tariffs. Since the U.S. steel and aluminum industry can’t actually produce as much of the metals as the market demands, imports remain necessary. That means that there is a necessary process of dolling out exclusions for steel and aluminum that the U.S. needs.
That exclusions process starts when importers file an application to import their product, in this case steel or aluminum, tariff-free. Then, U.S. manufactures can file objections followed by a review process to determine if the objection is credible. Eventually, after compared against opaque criteria complete with lagging notifications, a decision to grant the exclusion or not is made.
That takes a long time. Indeed, most of Canada’s applications for exclusions are still waiting to be processed. The shutdown exacerbated the backlog, leaving Canadian exporters languishing even longer in bureaucratic limbo.
But even if the process is unclear, the effect isn’t: Canada, a U.S. ally and its largest supplier of steel and aluminum, is the loser of Washington’s trade war and China is a winner.
That’s exactly the opposite of what steel and aluminum tariffs imposed under Section 232 of the Trade Expansion Act of 1962 were supposed to do. When Trump justified those taxes, his administration cited Chinese production specifically as a national security threat and initially excluded Canada and Mexico from the tariffs entirely. Those exemptions were lifted in May 2018 subjecting Canada and Mexico to the same tariffs.
Gumming up trade with new complications, additional legal wrangling over exclusions, and more bureaucracy does nothing to advance either the national security or economic interests of the United States. Instead, it distorts markets, blocks trade and hurts key allies.
When this is the trade war reality, there is no winning.
