40 per cent of Chinese steel imports – and just 2 per cent of Canadian imports – excluded from U.S. tariff

So far, the U.S. Department of Commerce has excluded about 40 per cent of imports of Chinese steel from facing its 25 per cent tariff. But to date, only two per cent of the total volume of Canadian steel imports to the U.S. has been cleared to dodge the tariff.

The head-scratching discrepancy gets even stranger with the United States’ 10 per cent tariff on aluminum imports.

About 86 per cent of Chinese aluminum imports now enter the U.S. tariff-free, while less than one per cent of Canadian aluminum shipments do.

“If the whole point was to do this for China in the first place, then why are the approval rates for China so much higher than other countries?” said Christine McDaniel, a former White House economic adviser, now a senior research fellow with the Mercatus Center at George Mason University.

“It just doesn’t make sense.”

The recent U.S. government shutdown gave McDaniel and her research colleague Danielle Parks an opening to comb through all the exclusion applications submitted last year and group the results by country of origin. Exclusion applications are filed by importers — manufacturers, retailers or construction companies, for example — who want to import tariff-free. McDaniel said the results of their research were so surprising, they ran the numbers a second time just to make sure.

“It does correspond with what we’re hearing anecdotally from steelmakers in Canada — that they’re not getting anything through,” McDaniel said.

Catherine Cobden, the new president of the Canadian Steel Producers Association, said the analysis tells a pretty troubling story.

“Canada’s getting hurt more than others through the tariffs,” she said. “Are these tariffs doing what they were intended to do?”

The tariffs aren’t giving North American suppliers a boost, she said. Quite the opposite.

“Whatever process they’re using, it’s unfairly tilted towards China, which is crazy,” she said. Her association’s members suspected the tariffs were distorting markets, she said, but this work “demonstrates with real data what that picture looks like.”

U.S. steelmakers objecting to exclusions

While the results for China conflict with the Trump administration’s rhetoric, the large exporting country that’s been most successful in the exclusion process so far is Japan: 62 per cent of its steel imports to the U.S. no longer face the tariff.

The Japanese manufacture specialty metals; comparable U.S. substitutes tend not to be available for them. It’s possible that what Canadian mills produce is more easily swapped with American product.

Exclusion applications are considered according to specific criteria, such as whether the same product is available in the U.S. Domestic steel companies can monitor these applications and file objections, according to their own business interests. The complicated process also allows for a rebuttal from the company trying to get its shipments excluded.

In some cases, the arguments have sought to interfere in companies’ right to make their own business decisions, McDaniel said. One company, she said, was told it shouldn’t be able to import pipe of a certain length tariff-free when it could buy American pipe and weld pieces together to make up the right length — notwithstanding the extra labour and environmental effects involved.

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