In a series of early morning tweets, President Donald Trump unexpectedly announced today that he is reimposing tariffs on steel and aluminum imports from Brazil and Argentina, accusing the two countries of harming the U.S. economy by deliberately manipulating their currencies in order to boost agricultural exports.
“Brazil and Argentina have been presiding over a massive devaluation of their currencies. which is not good for our farmers. Therefore, effective immediately, I will restore the Tariffs on all Steel & Aluminum that is shipped into the U.S. from those countries,” Trump stated.
The Brazilian currency, the real, is down more than 8% against the U.S. dollar this year and last week fell to a record low, prompting that country’s central bank to intervene in the market to curb depreciation. Meanwhile, the Argentine peso is down 37% as South America’s second largest economy struggles with yet another debt crisis and economic turmoil ahead of a new populist government being sworn in later this month. It should be noted that in its latest report, released in May, the Treasury Department did not allege Brazil or Argentina had done anything improper in handling their currencies.
Trump also called on the Federal Reserve to “act so that countries, of which there are many, no longer take advantage of our strong dollar by further devaluing their currencies.” Despite the central bank having already cut rates three times since July, by a total of 0.75%, the president once again urged the Fed to “Lower Rates & Loosen,” arguing that a strong dollar “makes it very hard for our manufactures [sic] & farmers to fairly export their goods.”
The White House first implemented global steel and aluminum tariffs in March of 2018 on national security grounds, with President Trump declaring at the time that “aggressive foreign trade practices” related to the metals constituted an “assault on our country” and the U.S. steel industry. Brazil and Argentina were soon exempted from the punitive 25% steel and 10% aluminum tariffs though, after the White House said it had reached deals that would effectively restrict exports from the two countries.
According to Census Bureau data, the U.S. purchased more steel from Brazil in the first nine months of this year—mostly semi-finished products used in the steel industry—than any other country besides Canada, making up nearly 11% of all steel imports. Argentina only accounted for less than 1% of imports during the same period though (the country ranks just 30th in the world in terms of steel production and most of its exports are directed to other developing countries).
However, as major agricultural exporters, both Brazil and Argentina have benefited from the U.S. trade war with China, which has hurt American exports of soybeans and other farm goods. Brazil is the second biggest soybean producer in the world and has eagerly rushed to fill Chinese demand since Beijing imposed retaliatory tariffs on U.S. agriculture. Argentina recently made a deal with China that will allow it to import soymeal starting next year.
The surprise move against the two South American countries comes at a time when the Trump administration is striving to complete a preliminary “phase one” trade deal with China that would see Beijing buy up to $50 billion of U.S. agricultural products in exchange for a partial rollback of tariffs the U.S. has slapped on roughly $360 billion worth of Chinese imports.
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Formal notices of the tariffs have not yet been officially announced by the Office of the U.S. Trade Representative or other government departments. However, should you have any questions about this breaking development on the trade war front in the meantime, don’t hesitate to contact us – our trade experts are here to help.