On The Hill

Trade Update (August 10)

Aug 10, 2020 | SHARE  
Canadian Aluminum
 
The Trump administration announced on Thursday (Aug. 6) that it will reimpose tariffs on aluminum imports from Canada. The U.S. will put a 10 percent duty on certain types of the metal starting on Aug. 16.
 
The move comes after the U.S. failed to get Canada to impose quotas on its exports of aluminum.
 
“Earlier today, I signed a proclamation that defends American industry by reimposing aluminum tariffs on Canada,” Trump said during a visit to a Whirlpool manufacturing plant in Ohio. Trump alleges Canadian companies were flooding the U.S. market and hurting American employment.[1]
 
Trump’s decision comes directly after the replacement deal for NAFTA, the US-Mexico-Canada Agreement (USMCA) entered into force on Jul. 1. Trump had been considering the tariffs since mid-June.
 
The tariffs will be imposed on imported “non-alloyed unwrought aluminum” from Canada. This material is used to make aluminum ingots, blocks, billets, and slabs.
 
On Thursday (Aug. 6), Trump said as a part of USMCA he had agreed to lift aluminum tariffs in return for, “a promise from the Canadian government that its aluminum industry would not flood our country with exports and kill all our aluminum jobs, which is exactly what they did. Canadian aluminum producers have broken that commitment and the U.S. Trade Representative, Robert Lighthizer, has advised me that this step to reimpose tariffs is absolutely necessary to defend our aluminum industry.”[2]
 
Canada has pledged retaliation, and said the tariffs would hurt workers and regional economies already hit hard by the COVID-19 pandemic.
 
On Friday (Aug. 6), Canadian Deputy Prime Minister Chrystia Freeland announced the country’s plans to retaliate with $3.6 billion in countermeasures on a “broad and extensive list” of aluminum products.
 
“In response to the American tariffs, Canada intends to swiftly impose dollar-for-dollar countermeasures,” Canadian Deputy Prime Minister Chrystia Freeland said in a statement.[3]
 
The U.S. Chamber of Commerce called the tariffs “a step in the wrong direction” and that it would raise costs on companies and consumers. The Aluminum Association said the move undermined USMCA.
 
To view Trump’s proclamation, click here.
 
To view Canada’s notice of intent to impose countermeasures action against the U.S., click here.
 
To view Freeland’s statement, click here.
 
 
Buy American EO
 
On Thursday (Aug. 6), President Trump signed an Executive Order (EO) that calls on federal agencies to purchase “essential drugs” and medical supplies made in the U.S., rather than from overseas companies.
 
The order aims to guard against shortages of critical medicines and supplies due to breakdowns in the global supply chain.
 
The order does not immediately specify which drugs or supplies should be manufactured in the U.S. Instead, it directs the FDA to make that determination. Additionally, the order allows for broad exemptions based on cost, availability, and public interest. The order “carves out” certain drugs if domestic production would increase procurement costs more than 25 percent or if they are already made outside the U.S. and are still of satisfactory quality.[4]
 
“We’re dangerously overdependent on foreign nations for essential medicines, for medical supplies like masks, gloves, goggles and the like,” said Peter Navarro, Trump’s top trade adviser, on a call with reporters.
 
The order will likely focus on bringing future capacity for domestic drug manufacturing rather than immediately moving existing manufacturing to the U.S. Only 28 percent of manufacturing facilities making drug ingredients for the U.S. are domestically based.
 
Other parts of the order aim to cut EPA and FDA regulations to speed development of domestic advance manufacturing for products needed for rapid response to pandemic, biological, chemical, nuclear, and radiological threats.
 
To view the full text of the EO, click here.
 
To view a fact sheet, click here.
 
 
US-China
 
TikTok
 
Late Thursday (Aug. 6) evening, President Trump issued an EO prohibiting transactions with ByteDance, the parent company of TikTok. The order is set to take effect on Sept. 20 and bars Americans and U.S. companies from conducting transactions with the company, citing national security concerns.[5]
 
To view the EO, click here.
 
Earlier this week, Trump told reporters TikTok must end its U.S. operations by Sep.15, 2020, if a pending deal with Microsoft to buy the company does not go through.
 
“I don’t mind whether it’s Microsoft or somebody else — a big company, a secure company, a very American company — buys it,” Trump said. “It’s probably easier to buy the whole thing than to buy 30 percent of it,” he added.
 
TikTok has pushed back against concerns raised by the Trump administration and lawmakers.
 
On Tuesday (Aug. 4), a Chinese spokesman said the U.S. was discriminating against TikTok because it was owned by a Chinese company. China claims this is against World Trade Organization (WTO) rules, and said the U.S.’ expansive definition of “national security” subjects foreign companies to politically-motivated restrictions.[6]
 
“For a while, without providing any evidence, the U.S. has stretched the concept of national security and abused its state power to bring down certain non-U.S. enterprises,” Chinese Foreign Affairs Ministry spokesman Wang Wenbin said on Tuesday (Aug. 4).
 
Phase 1
 
Senior U.S. and Chinese officials will conduct a review of the implementation of the Phase 1 trade deal on Aug. 15 via videoconference. Both countries will likely air mutual grievances about the increasingly tense relationship.
 
U.S. Trade Representative (USTR) Robert Lighthizer and Chinese Vice Premier Lui He will participate in the meeting, which is the “formal” initial six-month review of the deal activated on Feb. 15. China is far behind the pace needed to meet its first-year goal of a $77 billion increase in imports. Imports of farm goods have been lower than the 2017 level and far behind the 50 percent increases needed to meet the 2020 target of $36.5 billion.[7]
 
China has also only bought five percent of the energy products needed to meet the Phase 1 targets.
 
Trump has threatened to end the trade pact over China’s handling of the COVID-19 pandemic.
 
Taiwan
 
U.S. Health and Human Services Secretary Alex Azar is planning to lead a delegation to Taiwan in a rare high-level U.S. visit. In a statement, Azar said his trip is intended to show President Trump’s support for Taiwan, its democratic government, and the leadership it displayed in handling the COVID-19 outbreak.[8]
 
A spokeswoman for the Chinese Foreign Ministry warned the visit would result in China taking “strong countermeasures in response to the U.S. behaviour” and that any attempt to challenge the “One China” policy would end in failure.[9]
 
 
232
 
On Wednesday (Aug. 5), the U.S. Court of International Trade (CIT) reprimanded the Trump administration for failing to sufficiently explain its decisions for rejecting a steel importer’s requests to be excluded from national security tariffs. This move sends the request back for reconsideration.
 
CIT Judge Claire R. Kelly said the decisions issued by the U.S. Department of Commerce’s Bureau of Industry and Security do not explain what evidence it relied on to deny tariff exclusions for JSW Steel USA Inc.
 
“The court cannot be certain what record evidence, if any, Commerce relied upon when both the BIS decision memoranda and ITA recommendation memoranda do not explain what information the sub-agencies considered, how it was weighed, or why the evidence compelled denial,” Kelly said.
 
In 2018, President Trump placed a 25 percent tariff on steel and a 10 percent tariff on aluminum using Section 232 of the Trade Expansion Act of 1962. The process allowed importers to seek exclusions for their goods if they were unavailable from domestic producers, as well as domestic producers to file objections to those requests.
 
Judge Kelly said Commerce needs to ensure it has provided the court with all evidence it relied upon to reach its decisions and explain why any omitted communications with objectors weren’t used in its decision making.[10]
 
The decision was a partial victory for JSW USA, a subsidiary of JSW Steel Ltd., an Indian steel producer that sued Commerce in July 2019. JSW USA claimed the agency’s decisions weren’t based on sufficient evidence. It also alleged Commerce accepted U.S. producers’ claims that they could produce the steel it needed without verifying those claims.
 
On Wednesday (Aug. 5), the CIT ordered the Commerce Department to remand all 12 exclusion requests and provide “further explanation as to the steps taken to complete the record consistent with this opinion and to supplement the record as appropriate.”
 
 
Kodak Loan Under Investigation
 
The Security and Exchange Commission is investigating the circumstances around Eastman Kodak Co.’s announcement of a $765 million government loan to make drugs at U.S. factories.
 
Kodak’s shares rose as high as $60 last week, before falling to $15 on Monday (Aug. 3). The investigation is at an early stage and may not produce allegations of wrongdoing. Regulators will probe how Kodak controlled disclosure of the loan and word of which began to emerge on July 27.[11]
 
On Wednesday (Aug. 5), House Democrats announced they were also launching a probe into the $765 million federal loan received by Kodak. House Coronavirus Crisis Subcommittee Chairman Jim Clyburn (D-SC) and House Financial Services Chairwoman Maxine Waters (D-CA) sent letters to Kodak Executive Chairman James Continenza and U.S. International Development Finance Corp. CEO Adam Boehler, seeking information on how Kodak was able to acquire the loan and if there was any financial malpractice following a significant increase in the stock price.
 
“Companies and individuals that receive federal funds in response to the coronavirus crisis must follow the law and not engage in abusive practices,” they said in the letter to Continenza.
 
“DFC’s decision to award this loan to Kodak despite your company’s lack of pharmaceutical experience and the windfall gained by you and other company executives as a result of this loan raise questions that must be thoroughly examined,” they added.[12]
 
To view the letter to Continenza, click here.
 
To view the letter to Boehler, click here.
 
 
June Trade Numbers
 
On Wednesday (Aug. 5), a Commerce Department report showed U.S. exports increased more than nine percent in June, the largest monthly gain on record. However, exports are still far below 2019 levels due to the impact of the COVID-19 pandemic.
 
Imports from all countries increased 4.7 percent in June, reducing the trade deficit from $54.8 billion in May to $50.7 billion in June.[13]
 
Commerce will release trade figures for January-July on Sep. 3, 2020.
 
To view the Commerce Department’s report, click here.
 
 
 WTO
 
On Friday (Jul. 31), members of the World Trade Organization (WTO) were unable to agree on the appointment of an interim chief. Until the next Director General is chosen, the four deputies will continue with their existing responsibilities.
 
Outgoing WTO Director General Roberto Azevêdo said it was disappointing members did not rally around one candidate.
 
The WTO hopes to select a new trade chief by Nov. 7, 2020.[14] 
 
 
References
 
 
[2] “Trump confirms he will re-impose tariffs on Canadian aluminum.” Inside U.S. Trade, 6 Aug. 2020. https://link.edgepilot.com/s/fc0813e7/mxho7RKW5069rP5SeOrSXw?u=https://insidetrade.com/daily-news/trump-confirms-he-will-re-impose-tariffs-canadian-aluminum
 
 
 
 
[6] “China warns U.S. action against TikTok violates WTO rules.” Inside U.S. Trade, 4 Aug. 2020. https://link.edgepilot.com/s/a185c204/VL0Ha78OKkSfYcbNR2ufcg?u=https://insidetrade.com/daily-news/china-warns-us-action-against-tiktok-violates-wto-rules 
 
 
 
[9] Blanchard, Ben & Cadell Cate. “China threatens countermeasures as Taiwan prepares for U.S. visit” Reuters, Aug. 6, 2020.
 
 
[11] Michaels, David & Francis,Theo. “Kodak Loan Disclosure and Stock Surge Under SEC Investigation.” The Wall Street Journal, 4 Aug. 2020. https://link.edgepilot.com/s/813833ed/QL3OvYWwxUqMqy4HB4X86A?u=https://www.wsj.com/articles/kodak-loan-disclosure-and-stock-surge-under-sec-investigation-11596559126
 
 
 

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