What began as steep tariffs on steel and aluminum on U.S. imports has the potential to snowball into a trade war between the two largest economies in the world.
On top of the 25% tariff on steel and 10% tariff on aluminum imports, the U.S. has already imposed a seven year ban on U.S. companies from selling parts, software or services to mobile phone maker ZTE—the U.S. Department of Commerce says the company violated an agreement to sanction personnel who sold sensitive U.S. technology to Iran and North Korea— proposed tariffson more than 1,300 Chinese products worth up to $50 billion and is considering tariffs on an additional $100 billion in imports.
China is fighting back. After the Trump administration announced the proposed $50 billion tariff hike, Beijing announced it would also impose a 25% tariff hike on $50 billion of U.S. goods including soybeans, aircrafts, and cars. In trade negotiations with the U.S. last week, senior Chinese officials sent a deliberate message that “the days of Beijing being conciliatory were over, and that China was staking out its own position in the negotiations.”
But the Trump administration isn’t only in talks with China. In the Western Hemisphere the administration has reached agreements-in-principle with Argentina and Brazil. The U.S. will also extend exemptions for Canada and Mexico until June 1st to allow for further talks.
According to Census Bureau data, 40.39% of U.S. steel imports and 54.03% of U.S. aluminum imports in 2017 came from the Western Hemisphere. Canada, Brazil, and Mexico, the three largest sources of U.S. steel imports in the hemisphere, are also the first, twelfth, and second biggest markets for U.S. exports, respectively. While the Trump administration is finalizing deals with Brazil and Argentina, it is also in its best interest to exempt Mexico and Canada, if not for NAFTA alone.