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WASHINGTON -- U.S. allies seeking to avoid the steel and aluminum tariffs approved by President Donald Trump might be asked to step up their financial commitments to NATO, officials said.

Treasury Secretary Steve Mnuchin told CNBC in a Friday interview that the president will consider national security, noting that Trump wants to be sure that NATO gets more funding from European allies that Trump has previously criticized for not contributing enough.

"If we're in NATO, he wants to make sure that NATO gets more money so that NATO can protect all of us and fulfill its goal," Mnuchin said, underscoring Trump's push to get NATO allies to pay 2 percent of GDP on defense.

Other countries seeking exemptions from the tariffs will have to make their case through U.S. Trade Representative Robert Lighthizer, but the president will make the ultimate decision, a senior administration official told reporters Thursday. Specific steel and aluminum products also could be excluded and that authority will rest with Commerce Secretary Wilbur Ross.

Lighthizer was expected to be in Brussels this weekend for meetings with European and Japanese trade officials.

Trump drew on rarely used national-security grounds to place a 25 percent tax on steel imports and 10 percent tax on imported aluminum. Only Canada and Mexico -- both partners in the North American Free Trade Agreement being renegotiated -- were excluded from the tariffs.

Today, Australian Prime Minister Malcolm Turnbull signaled that the U.S. planned to also exempt his country.

"I was very pleased the president was able to confirm that he would not have to impose tariffs on Australian steel and aluminum," Turnbull told reporters hours after discussing the issue with Trump.

Trump had suggested before he signed the orders imposing the tariffs that Australia and "other countries" also could be exempted. He discussed the tariffs with Turnbull and President Mauricio Macri of Argentina in phone calls Friday, the White House said.

On Friday night, Trump tweeted: "Working very quickly on a security agreement so we don't have to impose steel or aluminum tariffs on our ally, the great nation of Australia!"

The treasury secretary said the U.S. wants to negotiate exemptions for steel and aluminum tariffs before they take effect in two weeks as pressure grows from allies.

"Ideally, some of them will be dealt with in this 15-day process so that they don't hit those countries," Mnuchin said, citing the legal time frame for implementing the tariffs.

The U.S. Commerce Department is to release regulations for the tariffs within 10 days. Mnuchin said that the secretary of commerce is entitled to issue waivers for specific products, while only the president can exempt entire nations.

The EU has warned that it could retaliate with tariffs on U.S. steel, agricultural and other products, such as peanut butter, cranberries and orange juice.

P. Welles Orr, senior trade adviser at the law firm Miller & Chevalier, said foreign governments are already asking how the exemption process will work.

"The short answer is, we don't know the specifics yet," said Orr, who was assistant U.S. trade representative in President George H.W. Bush's administration. "It's certainly going to be chaotic ... The business community sure hopes the administration will carefully do all the work it needs to do to make this an easy and transparent process."

Philip Levy, a former trade adviser in President George W. Bush's administration, said the flaw in Trump basing his tariffs on national security was that military allies could ask to be excluded, undermining the president's stated purpose of protecting domestic steel and aluminum mill jobs.

With national security as the primary issue, it would be hard to apply the tax to South Korea and Australia, meaning that they could ultimately land on Russia more than almost any other country, said Levy, now an adjunct professor at Northwestern University.

The proclamation signed by Trump ordering the tariffs does suggest some possible grounds for exemptions based on the specific reasons listed for excluding Canada and Mexico.

Those two countries were excluded because of "shared" commitments on national security and the reduction of excess production of steel worldwide, a provision aimed mainly at state-backed Chinese companies that Trump blames for flooding the world with cheap steel.

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The proclamation also notes how closely linked the United States, Canada and Mexico are, both economically and in terms of proximity.

Sen. Ron Johnson, R-Wis., the chairman of the Senate oversight committee, began a review of the president's decision to impose the tariffs, asking Ross for a "detailed cost analysis" of the impact on the economy, how employment levels were factored into the decision and national-security concerns.

On Friday, manufacturing nations began jockeying to be among those exempted from the levies, trying a mix of persuasion and threats, of personal appeals and diplomatic leverage.

South Korea invoked its role in trying to defang North Korea. Europe reminded the United States that it was, in fact, a long-standing military ally. And Australia deployed a secret weapon: the golfing legend Greg Norman, a friend of Trump.

Even as European Union leaders drew up a list of U.S. products they said would be subject to retaliatory tariffs and threatened to take their case to the World Trade Organization, they also recalled the long history of trans-Atlantic friendship.

Brigitte Zypries, the German economics minister, wrote in a letter to Ross that Europe and America should work together to address the real problem: a global glut of steel that has driven down prices.

"We need trans-Atlantic solidarity on this issue and not trade conflicts," she said.

But the process of winning an exemption from the tariffs is also perilous for the countries involved. If they offer something in return for favorable treatment -- like, say, the increases in military spending Trump has demanded from NATO allies -- they could encourage the president to use access to the U.S. market as a cudgel in the future.

"If you now start making concessions on other things, you give in to blackmail," said Guntram Wolff, the director of Bruegel, a research organization in Brussels. "I would reject that."

In their rush to shield domestic steel and aluminum producers, countries also risked creating an every-nation-for-itself atmosphere that would undermine the system for resolving global trade disputes that has been assembled over decades.

European Union countries, for example, were compiling a list of products with a strong correlation to Republican congressional districts, including Harley-Davidson motorcycles, bourbon, rice, kidney beans, sweet corn, tobacco and peanut butter. But Europe is likely to face a tough decision about whether to wait for World Trade Organization approval, a lengthy process, or simply to impose the retaliatory sanctions.

Cecilia Malmstrom, the European commissioner for trade, said during a news conference Thursday in Brussels that any fighting back against the United States would be done "by the book."

Australia has already set a precedent with an energetic lobbying effort that seems to be paying off. Trump, who excluded Canada and Mexico from the tariffs, singled out Australia on Thursday as another country that could be exempt.

"We're calling in all contacts at every level," Julie Bishop, Australia's foreign minister, told the Australian Broadcasting Corp. "This is a very important matter for Australia. We will continue to push our case, we'll continue to advocate on behalf of Australia for as long as it takes."

Information for this article was contributed by Josh Boak and Ken Thomas of The Associated Press; by Jack Ewing of The New York Times; and by Andrew Mayeda and Hannah Levitt of Bloomberg News.

Business on 03/10/2018

Print Headline: U.S. weighs tying tariff waivers to NATO pay

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