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Trump set to impose steel tariffs; Canada, Mexico excluded for now

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Trump set to impose steel tariffs; Canada, Mexico excluded for now

President Donald Trump will sign two proclamations imposing steel and aluminum tariffs on the grounds that the levies are necessary to protect U.S. national security, according to a senior administration official speaking on background.

Trump will implement his proposed 25% tariff on U.S. global steel imports and 10% tariff on global aluminum imports March 8, both of which will go into effect March 23.

However, the tariffs initially will not apply to imports of steel and aluminum from Mexico and Canada, the latter being the largest exporter of steel into the U.S., according to the U.S. Department of Commerce.

The official said this exclusion would give the two neighboring countries a chance to rework the North American Free Trade Agreement to Trump's liking.

"The exemption for the two countries will go into effect immediately, and will continue for the foreseeable future until we determine how these discussions over our national security relationship are going," the official said. "What we're doing is giving Canada and Mexico sufficient time to address these issues at the request of the government. But it's not open-ended. We fully expect this to be resolved in a short enough time period."

Should the U.S. work out a satisfactory deal with Canada and Mexico and the two NAFTA trading partners be permanently excluded from the tariffs, the official said the administration would consider "modestly" raising the rate of the tariffs on the remaining countries that export steel and aluminium to the U.S.

Trump has also previously stated that should the U.S., Canada and Mexico come to a free trade deal agreement reworked to his administration's liking, he would exempt them from his tariffs. The three countries wrapped up the seventh round of NAFTA talks in Mexico City on March 5, where Canada threatened its own retaliatory measures should it be subject to the tariffs.

"NAFTA is an important part of the security relationship," the official said.

There is also a broader provision allowing any country included under the order with which the U.S. has a security relationship to meet with U.S. trade negotiators to discuss alternative ways to address what the Trump administration deems as a "national security threat" based on a dependence on steel and aluminum imports for defense purposes.

Should Trump deem the results from discussions with other countries satisfactory, he can "flex" the order, according to the official.

The official said the U.S. relies on imports for more than 90% of its aluminum, adding that only one American aluminum smelter is operating at full capacity to make military grade aluminium. Should that smelter go out of commission, the U.S. would have to rely on China or the Middle East for aluminum, posing a national security threat, the official noted.

The two nearly identical proclamations will be signed in the Roosevelt Room of the White House with "steel and aluminum workers from the Heartland" present, according to the official.

The tariffs could touch off a global trade war, including with the European Union, which has already formally threatened its own retaliatory 25% tariff measures on U.S. exports such as peanut butter and cranberries as well as informal tariff threats on products including Harley-Davidson Inc. motorcycles, Levi Strauss & Co. jeans and American-made shirts and textiles.

The administration official speaking March 8 did not mention any European countries among those exempt from the tariffs.

The official downplayed worries regarding increased costs to products such as beer, insisting that the cost of a six-pack would rise only by "a cent and a half or two cents," or a Boeing 777 airplane, which would cost "only $25,000" more.

Despite concerns that the tariffs may lead to complaints with the World Trade Organization, the official stressed that the tariffs are permissible under WTO rules.

The 25% tariff on steel is 1% higher than Commerce Secretary Wilbur Ross recommended to Trump in February following his department's investigation under Section 232 of the Trade Expansion Act of 1962, the law authorizing the assessment of national security risks of imports. The official said the increase was based on additional data and support that came in following the Commerce Department report.