What began as an unconventional move under a rarely invoked Cold War-era trade law is close to becoming President Donald Trump's most aggressive trade enforcement maneuver yet. The president is slated to finalize a 25 percent duty on imported steel and a 10 percent tariff on aluminum sometime this week.
If the tariffs move ahead as planned, it could set off an escalating wave of retaliation from U.S. partners that global leaders say could result in economic calamity.
"An eye for an eye will leave us all blind in the world of deep recession," World Trade Organization Director-General Roberto Acevedo said Monday in Geneva. "We must make every effort to avoid the fall of the first dominoes. There is still time."
As the White House wraps up its internal deliberations, Law360 takes you through all of the story's twists and turns.
April 2017: Commerce Pulls the Trigger
Trump ascended to the presidency in part by vowing to get tough on trade enforcement, a promise that began to take shape just three months into his term. The U.S. Department of Commerce opened its steel investigation on April 20, vowing to ascertain whether those imports posed a national security threat under Section 232 of the Trade Expansion Act of 1962.
Just six days later, the agency did the same thing for aluminum imports. A law that had sat dormant since 2001 had now been invoked twice inside of a week.
Immediately, Republicans and Democrats alike began to wonder just how aggressive the administration would be. The law, a holdover from the Cold War, seemed an odd fit in the modern global economy, where supply chains are growing more vast and complex and the growth of the World Trade Organization has generally yielded open markets.
Under Section 232, Commerce must study the effects of certain imports to see if they can be deemed a threat to U.S. national security and propose trade restrictions if it finds that such a threat exists. The White House can then accept or reject those proposed trade restrictions or forge ahead with restrictions of its own devising.
May 2017: Motives Are Questioned
Although the explicit focus of Section 232 is to address threats to U.S. national security, Trump, Commerce Secretary Wilbur Ross and others in the administration made it clear from the outset that the U.S. was now looking to use the law as way to counteract unfair trade practices like dumping that traditional remedies had failed to address in a serious way.
This led some to speculate that the U.S. could be leaving itself vulnerable to a challenge at the World Trade Organization, where countries affected by the Section 232 restrictions could argue that the national security justification was merely a ruse to shield U.S. producers from foreign competition.
But a looming WTO challenge also illustrated what many observers feared most about the law's use. The WTO allows countries to impose trade restrictions on the basis of national security, but the boundaries of that exception have never been tested by a dispute settlement panel.
This is part of the reason that Section 232 had not been used since 2001 and had not led to the imposition of tariffs since 1975, before the WTO was formed. Under the darkest scenario for trade liberalization advocates, Section 232 tariffs would go into force, be successfully defended under the national security exception, and embolden other countries to follow suit with their own, essentially invincible restrictions.
June-July 2017: Hurry Up & Wait
Section 232 provides just shy of a full year for the process to run its course — 270 days for Commerce to investigate, 90 more days for the president to consider its recommendations. It looks as though the administration will end up taking almost all of the time allotted to it, but that didn't always appear to be the case.
Looking to make a big splash, Ross and Trump signaled out of the gate that they were looking to move the probe along at a much more rapid pace. Early on, there were signals that Commerce was aiming to deliver its reports by the end of June, drastically truncating the statute's timelines.
But as opposition mounted, both from the business community and major U.S. partners, the June deadline was shelved and the investigations were mostly put on the back burner as Commerce continued to gather data for its eventual reports.
March 1: Enforcement Hammer Looms
The Section 232 saga came to a boiling point last week, when Trump emerged from a meeting with steel and aluminum executives with a declaration that the U.S. would be moving forward with a 25 percent global tariff on imported steel and a 10 percent duty on aluminum.
After the meeting — which was initially deemed a "listening session" during which no final decisions would be made on tariffs — Trump went slightly further than the Commerce Department's recommendations. The agency had proposed global tariffs along with more targeted tariffs paired with import quotas.
Trump said a final decision on the tariffs would be coming this week, and the White House is currently in the process of finalizing the details of the duty orders. The key factor to watch is whether the U.S. will exempt any of its major partners from the tariffs, a route that the president does not seem willing to travel.
If and when the tariffs take effect, the U.S. is likely to face steep retaliation both in the form of tariffs on its own merchandise and enforcement actions at the WTO.
--Editing by Mark Lebetkin and Jack Karp.
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