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Trump suspends import duties to boost economy, aluminum and steel are left out
The Trump administration will ease its hardline stance on trade, allowing for a partial reprieve to U.S. companies hit hard by the COVID19 pandemic. The Executive Order was signed on April 18, 2020.
It’s important to note that companies won’t be exempt to pay import duties altogether, which is what many were hoping for. According to Larry Kudlow, the Director of the National Economic Council, even a limited relaxation would be too “complicated” and would send “wrong signals” about Mr Trump’s trade policies. The measure will instead provide for a delay of payments for some duties, taxes, and levies by 90-days. The postponement will free up much needed cash, temporarily relieving worst-hit companies from this burden and helping them get through these hard times.
However, the move most notably does not cover the tariffs on more than $360bn of Chinese imports, nor does it apply to levies imposed by the US against imports of steel and aluminum over the past two years, as had been urged by CAMMU members (The Coalition of American Metal Manufacturers and Users). Therefore, despite a truce reached in January, the trade standoff between Washington and Beijing remains in force.
Since their introduction two years ago, the steel and aluminum tariffs have had - according to detractors - a negative impact on steel-using manufacturers and consumers across the U.S. As reported by CAMMU even before the pandemic, domestic steel production has proven to be insufficient to meet demand, with higher steel prices and long delivery times for steel from the U.S. suppliers, thus losing grounds to overseas competitors.
The damage from tariffs to the manufacturing sector and the U.S., economy more in general is also stated by several studies.
For example, a study by the Federal Reserve Board shows how manufacturers most exposed to tariffs experienced a 4.1% increase in factory-gate prices and a reduction in employment of 1.4%. The import protection effect of tariffs (0.3%) is therefore offset by the negative effects associated with rising input costs (-1.1%) and retaliatory tariffs (-0.7%).
According to Moody’s Analytics report, “Trade War Chicken: The Tariffs and the Damage Done,” the trade war had reduced U.S. employment by 300,000 jobs and reduced U.S. GDP by 0.3% compared with likely employment and GDP levels absent the trade war.
Nonetheless, this marks an important first step forward since the President and the administration top officials implicitly acknowledge how much of a burden these import levies are for U.S. importers.