The Big Picture
On February 10, 2025, President Donald J. Trump issued a Presidential Proclamation levying tariffs of 25% on all steel and aluminum imports into the United States from any country in the world, no exceptions. In addition, the Proclamation terminated existing exclusions for U.S. manufacturers and other U.S.-based companies who import steel and aluminum for use in their own, domestic processes. For the most part, these tariffs will go into effect on March 12, 2025.
It is possible that Trump may withdraw, or “pause,” these tariffs prior to March 12, as he did in late January with threatened tariffs on “all products” coming into the U.S. from Mexico and Canada. A late hour climbdown seems unlikely, however, since Trump has articulated no geopolitical objective (such as fentanyl eradication) to which America’s trading partners can acquiesce in order to avoid these levies. Short of a stock market meltdown or extraordinarily severe retaliatory trade measures taken by America’s trading partners, these tariffs seem likely to be with us for the foreseeable future.
“No exceptions/No Exclusions”
As noted, the current round of steel and aluminum tariffs will have no “outs” whatsoever. As a result of this “no exceptions/no exclusions” approach, these latest tariffs will likely have a much broader and deeper impact than those levied during Trump’s first Administration (which were, by and large, continued by Biden).
For example, during “Trump 1.0” and continuing into the Biden Administration, aluminum tariffs were initially only 10% versus the current 25%. More significantly, many countries allied with the United States, such as Brazil, Canada, Mexico, South Korea, and other major steel producers, were exempted from those tariffs, although frequently subject to volume quotas. This time around, even “friends and family” will have to pay up.
Equally significant, the previous Trump Administration created an “exclusion process” (again, kept in place by Biden), whereby U.S. manufacturers and other users of steel and aluminum could prove their inability to cost-effectively source steel/aluminum domestically and thereby obtain exclusions from the tariffs. No more. Existing product exclusions will remain effective until their expiration or until the preset product volume is imported, whichever occurs first. The Secretary of Commerce is mandated, however, to terminate all existing “general exclusions” as of March 12, 2025.
Derivative Products
In addition to imports of steel and aluminum, the February 10 Proclamation levies tariffs on products derived from these base materials. Precisely what constitutes a derivative product will be defined in an Annex to be issued.
Based on prior Proclamations and Executive Orders, however, such as Proclamation 9980 issued on January 24, 2020, it seems likely that downstream aluminum products such as stranded wire and automotive bumper stampings, as well as steel products such as nails, tacks, staples, drawing pins, corrugated nails, auto bumper stampings and auto body stampings, will be considered derivative products. Derivative steel articles processed in another country from steel articles that were melted and poured in the United States, however, or from aluminum smelted and cast in the U.S, will not be subject to the tariffs.
Moreover, by May 11, 2025, the Secretary of Commerce is directed to establish a process for including additional derivative steel articles to be subject to tariff. The Secretary of Commerce may add articles on his own initiative, or at the request of a producer of a steel article or derivative steel article, or an industry association representing one or more such producers, if the request establishes that imports of that article have increased in a manner that threatens to impair the national security or otherwise undermine the objectives of the Proclamation. In this event, the Secretary is mandated to issue a determination regarding whether to include such a derivative steel article within 60 days of receiving the request. The Proclamation does not make clear whether opponents of such a designation will have an opportunity to weigh in, although due process would seem to require as much.
Foreign Trade Zones and Duty Drawback
As has been typical with most, if not all, of the tariffs put on by President Trump, using a Foreign Trade Zone will not avoid these tariffs if the goods in question ultimately enter the Customs Territory of the United States since the goods must enter an FTZ in “privileged foreign status.” In this status, articles will be subject to the applicable tariffs upon leaving the FTZ. Similarly, no duty drawback will be available with respect to these tariffs.
