Australia joins 232 tariff exemption parade

Australia will be exempt from the Trump administration’s Section 232 tariffs on steel and aluminium imported into the United States.

Australia will be exempt from the Trump administration’s Section 232 tariffs on steel and aluminium imported into the United States.

“What we have achieved is a commitment from [US President Donald Trump] that the tariffs on steel and aluminum will not apply to exports from Australia,” Australian Prime Minister Malcolm Turnbull tweeted on Monday March 12.

Turnbull’s tweet followed a similar post from Trump that indicated the US ally would be spared from the 25% duties on foreign steel and 10% duties on foreign aluminium that Trump signed into law on Thursday March 8. At the time of the signing, Trump had included exemptions only for US North American Free Trade Agreement partners Canada and Mexico.

“[Turnbull] is committed to having a very fair and reciprocal military and trade relationship,” Trump tweeted on Friday March 9. “Working very quickly on a security agreement so we don’t have to impose steel or aluminum tariffs on our ally, the great nation of Australia!”

On the steel side, Australia is an important supplier of flat-rolled products to the US market, in particular to steel processors on the West Coast.

Case in point: Australian steelmaker BlueScope operates Steelscape – a joint venture with Japan’s Nippon Steel & Sumitomo Metal Corp – that maintains plants in Kalama, Washington and Rancho Cucamonga, California. BlueScope claims to be the sole exporter of Australian steel to the US. While Steelscape relies on the imported feedstock to make coated and painted flat-rolled products for customers west of the Rocky Mountains.

The West Coast has few mills that melt steel, largely because of environmental restrictions, so it relies on facilities that process imports or convert slabs.

Despite its importance to the West Coast steel market, Australia was not among the top foreign steel suppliers to the United States in 2017. It shipped just 366,900 tonnes of steel to US ports last year, or about 1% of the 36.87-million-tonne import total for 2017, according to US Commerce Department figures. The bulk of that material was cold-rolled, hot-rolled and coated flat-rolled steel.

Prior to the 232, Australia was already subject to US trade duties. Hot-rolled coil from Bluescope, for example, already faces anti-dumping duties of 29.58%. Section 232 tariffs would come on top of that amount.

On the aluminium side, the US is not traditionally a destination for Australian shipments of the light metal. But Australia’s exemption could see its aluminium output go to the US, should US aluminium premiums rise enough as a result of 232 to justify such deals.