Now Ar­gentina and Brazil face U.S. metal tar­iffs

San Francisco Chronicle - - BUSINESS REPORT - By Ana Swanson

WASH­ING­TON — Pres­i­dent Trump said Mon­day that he would impose tar­iffs on steel and alu­minum from Brazil and Ar­gentina, a move that would shat­ter pre­vi­ous agree­ments with those coun­tries and widen a global trade war that the pres­i­dent had ap­peared ready to scale back.

In a tweet, Trump ac­cused Brazil and Ar­gentina of ma­nip­u­lat­ing their cur­ren­cies and hurt­ing Amer­i­can farm­ers. “There­fore, ef­fec­tive im­me­di­ately, I will re­store the Tar­iffs on all Steel & Alu­minum that is shipped into the U.S. from those coun­tries.”

The Trump ad­min­is­tra­tion can­not re­store tar­iffs be­cause it never im­posed them on Brazil­ian and Ar­gen­tine met­als, though it did force them to limit ship­ments to the United States un­der a quota system last year. The United

States ex­empted Brazil, Ar­gentina and other coun­tries from the pres­i­dent’s sweep­ing metal tar­iffs in March 2018, with the United States say­ing it would con­tinue ne­go­ti­a­tions with those coun­tries to im­prove their trade terms. In May 2018, the United States an­nounced that it had reached an agree­ment with the coun­tries that would cap their metal ship­ments at a spe­cific vol­ume each year.

But the pres­i­dent’s move sug­gested that nei­ther pre­vi­ous agree­ments nor po­lit­i­cal al­liances could pro­tect a coun­try from sud­den trade con­fronta­tions with the United States. Eco­nomic strug­gles — such as those con­fronting Brazil and Ar­gentina — also ap­peared to be no de­fense. Trump’s an­nounce­ment was par­tic­u­larly jar­ring to Brazil’s con­ser­va­tive pop­ulist pres­i­dent, Jair Bol­sonaro, who had gone to great lengths to strengthen ties with the Trump ad­min­is­tra­tion, with little to show for it.

“Alu­minum?” Bol­sonaro asked when re­porters pre­sented him with Trump’s tweet. “If that’s the case, I’ll call Trump. I have an open chan­nel with him.”

Dante Sica, Ar­gentina’s min­is­ter of pro­duc­tion, called the move “com­pletely un­ex­pected.”

“I was in Wash­ing­ton last week, and I talked to a lot of peo­ple, and there was no sign what­so­ever that there would be any kind of change,” he said.

It is un­clear what prompted Trump to re­verse pre­vi­ous agree­ments. But last week the Brazil­ian cur­rency, the real, fell to a record low against the dol­lar af­ter the coun­try’s eco­nomic min­is­ter sig­naled that he was not con­cerned about ex­change­rate fluc­tu­a­tions.

Ar­gentina’s peso has weak­ened with the coun­try in the midst of an eco­nomic cri­sis.

Both econ­o­mists and govern­ment of­fi­cials have re­jected the idea that Brazil and Ar­gentina are ma­nip­u­lat­ing their cur­ren­cies. But those cur­rency move­ments have made Brazil­ian and Ar­gen­tine goods cheaper to pur­chase abroad, a dy­namic that is par­tic­u­larly im­por­tant for the agri­cul­tural sec­tor and the U.S.­China trade war.

China is a ma­jor pur­chaser of U.S. pork, soy­beans and other agri­cul­tural goods. As the United States and China have slapped tar­iffs on each oth­ers’ prod­ucts in a year­long trade war, China has shifted to pur­chas­ing prod­ucts from Brazil and Ar­gentina in­stead, a move that has ran­kled Trump and other U.S. of­fi­cials.

“I gave them a big break on tar­iffs, but now I’m tak­ing that break off be­cause it’s very un­fair to our man­u­fac­tur­ers and very un­fair to our farm­ers,” Trump told re­porters Mon­day. “Our steel com­pa­nies will be very happy, and our farm­ers will be very happy.”

As of Mon­day morn­ing, nei­ther the Of­fice of the U.S. Trade Rep­re­sen­ta­tive nor the Com­merce Depart­ment had is­sued the for­mal no­tices that would put tar­iffs on Brazil and Ar­gentina into ef­fect.

If they are im­posed, the tar­iffs stand to do con­sid­er­able dam­age to South Amer­ica’s two big­gest economies at a time when Ar­gentina is in re­ces­sion and Brazil con­fronts high un­em­ploy­ment and ane­mic growth.

Sica scoffed at the claim that Brazil and Ar­gentina have been de­lib­er­ately de­valu­ing their cur­ren­cies.

“Our cur­rency has a flex­i­ble ex­change rate and adapts it­self to global changes,” he said.

Brad Setser, a se­nior fel­low for in­ter­na­tional eco­nom­ics at the Coun­cil on For­eign Re­la­tions, said nei­ther Brazil nor Ar­gentina are ma­nip­u­lat­ing their cur­rency. He added that Ar­gentina is in a “full blown” eco­nomic cri­sis and is close to run­ning out of for­eign ex­change re­serves, af­ter sell­ing for­eign cur­rency to try to sup­port the value of the peso over the last year.

Any new tar­iffs would likely face le­gal chal­lenges, how­ever.

The pres­i­dent im­posed the tar­iffs to stop a flood of im­ported steel and alu­minum that his ad­min­is­tra­tion has claimed threat­ens Amer­i­can pro­duc­ers and thus U.S. na­tional se­cu­rity. The idea has been dis­puted, with sev­eral coun­tries bring­ing cases against the United States at the World Trade Or­ga­ni­za­tion.

And in a re­cent de­ci­sion, the U.S. Court of In­ter­na­tional Trade, a fed­eral court, ruled that Trump could not raise tar­iffs on steel ex­ports from Tur­key be­cause a 180­day dead­line set for that de­ci­sion had al­ready elapsed.

Jen­nifer Hill­man, a se­nior fel­low for trade and in­ter­na­tional po­lit­i­cal econ­omy at the Coun­cil on For­eign Re­la­tions, said the law that the pres­i­dent had used to is­sue the tar­iffs, Sec­tion 232 of the Trade Ex­pan­sion Act of 1962, did not give him the au­thor­ity to al­ter tar­iffs out­side of cer­tain time lim­its.

“Trump can­not legally con­vert the cur­rent quo­tas to tar­iffs,” she said. “Chang­ing a quota to tar­iff more than a year and a half af­ter the orig­i­nal ac­tion is out­side those lim­its.”

Peter Bauza / New York Times

Now Buenos Aires could feel the im­pact of a Pres­i­dent Trump tar­iff pol­icy, as he plans tar­iffs on met­als from Brazil and Ar­gentina.

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