While companies throughout the United States are boosting their purchases of steel and aluminum in an attempt to stockpile supplies before tariffs on imported steel and aluminum go into effect, President Trump has delayed the implementation of tariffs once again. For the second time, Trump has granted a temporary delay to the implementation of tariffs on steel and aluminum imports from the European Union, Mexico, and Canada. The tariffs are now set to go into effect on June 1.
Imports from the EU, Mexico, and Canada make up the bulk of US steel and aluminum imports, with imports of aluminum from Canada alone making up the majority of US aluminum importation. Exempting those three trading partners permanently would go a long way towards reducing the cost of the tariffs to American businesses, and would make it clear that Trump was intending to target China, South Korea, and other Asian countries whom Trump thinks are not trading fairly with the United States.
Still, the fact that there is no permanent exemption, only another delay, means that it is likely that Trump intends to use a permanent exemption as a bargaining chip to gain concessions in trade negotiations. With Canada and Mexico, in particular, Trump is likely to use the incentive of a permanent exemption from the tariffs to to put pressure on Canada and Mexico to offer concessions of their own during the renegotiation of the NAFTA treaty.
But without a permanent exemption, businesses aren’t going to have any way of planning out their purchases of raw materials. Not knowing whether the price of steel will be 25 percent higher or the price of aluminum 10 percent higher in a few months leaves businesses in a state of uncertainty that won’t be good for markets. While some businesses may choose to stockpile, others may choose to wait and see what happens before making their purchases. So let’s hope that the White House offers some clarity soon about whether or not it intends to permanently exempt the EU, Canada, and Mexico from steel and aluminum tariffs.