For Brazil And Argentina, How To Respond To New Trump Tariffs
President Trump's erratic strikes against the world's trading regime require a collective response, as unilateral state reprisals cannot check an 'arrogant' U.S. administration.
BUENOS AIRES — The decision by President Donald Trump to reimpose tariffs on Argentine and Brazilian steel and aluminum exports, as a response to the two countries' devalued currencies is a hard blow to both.
President Trump imposed tariffs of 25% on steel and 10% on aluminum from any source in March last year. Argentina and Brazil were exempted after agreeing to limit these exports in a quota system. Now to end the exemption, the Trump administration cited national security reasons foreseen in Section 232B of the 1962 Trade Expansion Act, adding farmers are also being harmed.
This would indicate the White House's concern over China redirecting its soy purchases in response to U.S. sanctions on its exportations. The excuse of manipulating exchange rates in lieu of a subsidy is not in line with any of the Uruguay Round accords and constitutes a unilateral decision in violation of international commitments.
The Agreement on Subsidies and Countervailing Measures says there must be a specific subsidy for an exporting firm or sector to justify applying compensatory tariffs. The problems of fluctuating exchange rates furthermore concern the International Monetary Fund, which is tasked with evaluating their effects on the balance of payments. It is not the first time the United States makes such allegations.
Trump has turned trade negotiations into a boxing match.
In August this year, the Treasury Department cited Section 3003 of the 1988 Trade Act in accusing China of manipulating its currency to compensate for punitive tariffs on its exports.
That contradicted the Department's own conclusions in its report of October 2018. President Trump has turned trade negotiations into a boxing match in keeping with his presidential style of the last three years. International norms are considered disposable, and both the U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin are always predisposed to find arguments to justify the president's unpredictable reactions.
Lack of predictability in trade negotiations is an impediment to investments, and ultimately slows global growth. The United States has also decided to block the World Trade Organization's Appellate Body, which has seven members and needs a minimum of three to function.
President Trump meets with Cabinet to discuss trade tariffs. –– Photo: Tia Dufour/White House/ZUMA
The United States has blocked the nomination of new members for disagreeing with the criteria used to resolve conflicts between parties. Countries have tried separately to face Trump's nonsensical reactions to avoid exacerbating the discord, but the lack of a consensual reaction appears merely to encourage such erratic measures, rather than to appease.
Our regional trade block Mercosur should question its trade policy with the United States at its next summit. It should take a collective complaint to the WTO to make the point that arrogance is not the way to solve trade conflicts.
*Frydman, an economist and diplomat, was Argentina's ambassador in Thailand.