Trump's steel and aluminium tariffs

The global trading system is subject to much uncertainty at the moment. A major catalyst for this uncertainty were the Proclamations made in March this year by US President Donald Trump imposing tariffs of certain articles of steel and aluminium from a range of countries.

While Australia was exempted from these measures, there were concerns raised from Australian producers that steel and aluminium products previously bound for the US might find themselves diverted into other markets, including ours. With that background, the Anti-Dumping Commission commissioned Cadence Economics to undertake detailed economic modelling of the proposed tariff increases, including estimates of the potential for trade diversion in steel and aluminium to the Australian market in response to these US tariff increases.

The results of our analysis have now been tabled in Parliament and were the subject of some discussion in the recent Economic Legislation Committee.

The modelling is based on an application of the Cadence Economics General Equilibrium Model, which is a global trade model that has been calibrated specifically to address this issue. This model is similar in design to that used by the US Department of Commerce to assess the impacts of interventions in the steel market.

To undertake the modelling we tailored our model to incorporate 21 separate regions and 24 productive sectors, including a disaggregation of steel and aluminium. After a painstaking review of US trade and protection databases, we were then able to implement scenarios that considered the impacts of increased tariffs on US steel and aluminium.

The analysis also considered existing trade remedies in place in the US, either general tariffs, Anti-Dumping or Countervailing Duties.

The analysis showed that under a literal reading of the Proclamations made by the White House, Australian steel imports were projected to increase by just under 13 thousand metric tonnes in 2020. Off base import levels of around 2 million metric tonnes, this represents an increase of 0.4 per cent. Australian aluminium imports were projected to increase by just under 300 metric tonnes in 2020. Off base import levels of around 300 thousand metric tonnes, this represents an increase of 0.1 per cent.

The conclusion?

While some uncertainty remains in relation to how the Proclamations made by the White House might apply over time, the results for Australian imports of both steel and aluminium were within a narrow band and are, essentially, immaterial.

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