Steel yourselves: tariff shock prompts SA's plea to the US
Minister makes formal submission as country faces 25% duty on steel and aluminium
Trade and Industry Minister Rob Davies has formally requested that South Africa be excluded from US duties on steel and aluminium.
This comes after President Donald Trump, in a presidential proclamation published late last week, temporarily exempted the European Union, Canada, Mexico, Argentina, Australia, Brazil and South Korea from 25% tariffs on steel products and 10% tariffs on aluminium, respectively. As “friendly nations”, these countries have until May 1 2018 to negotiate levies on steel and aluminium.
But their exemption means South African steel and aluminium exports to the US will be hit with a 25% duty.
Paolo Trinchero, CEO of the SA Institute of Steel Construction, said South Africa’s formal submissions “will involve a substantial amount of time and money with no guarantee of success”.He says the tariff applies to primary steel and some secondary products such as tube and pipe. Products with high value add, such as machinery, are not included.
Trinchero said: “I think the US approach is to flag items which are easy to classify and ring-fence. As products become more complex with substantial value add they disappear into categories famously referred to as ‘other’.”
Trinchero said earlier in March, when Trump first announced the tariffs, that the right approach was for the US to apply to the World Trade Organisation for anti-dumping measures, bound tariff rates and safeguards, if necessary. “This approach is a legal process that gives both sides the right of reply.”
The Department of Trade and Industry said South Africa’s ambassador to the US, Mninwa Mahlangu, has been engaging with White House national security council staff, the US State Department and the Office of the US Trade Representative on the tariffs.In addition, Davies has held a teleconference with ambassador Curtis CJ Mahoney, the deputy US trade representative for investment, services, labour, environment, Africa, China and the Western Hemisphere. This provided an opportunity for discussions, the department said.
The tariffs come amid broad industry investigations under Section 232 of the Trade Expansion Act of 1962, as amended, to help the US determine the effects of imports on its national security.In January 2018, the US Department of Commerce delivered Section 232 reports on steel and aluminium to Trump. These conclude that the country’s steel imports were nearly four times its steel exports, and that aluminium imports had risen to 90% of total demand for primary aluminium.Trichero said the Section 232 stipulation of national security applies to imported steel used in the US military industrial complex and “does not really work” when it comes to importing a fridge or a pump. “Perhaps quotas could form part of a negotiation or application” to lessen the affect of the tariffs.
The SA Iron and Steel Institute said customs data shows that total domestic exports of primary steel products to all countries in 2017 came to 2.4-million tons, or about 35% of South Africa’s estimated primary steel output of six million tons. The value of these exports was about R26-billion. The US makes up only about 10% of this.
The institute’s Abri Audie said that according to Trump’s proclamation, steel including ingots, blooms, billets, slabs, coils, plates, sheets, bars, rail accessories, structural shapes, pipe, wire and many other steel product types are affected.Meanwhile, Davies, in his submission to US authorities, has emphasised that South African exports of aluminium products to the US each year are equal to about 1.6% of that country’s total aluminium imports. These products consist of specialised aluminium sheet, coil and plate for processing in the US automotive, battery and aerospace industries.Hulamin CEO Richard Jacob said South African exporters to the US “are likely to be disadvantaged” depending on who they compete with in the exempted countries. The JSE-listed group is an aluminium beneficiator that supplies electric car maker Tesla with its products, among other US-based industries.
“The tariff codes named include both primary aluminium and certain other categories of processed aluminium,” Jacob said.
But what this might mean in terms of South Africa’s automotive exports to the US “is still unclear”.