“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 and aluminium that is shipped into the US from those countries,” Trump tweeted.
“The Federal Reserve should likewise act so that countries, of which there are many, no longer take advantage of our strong dollar by further devaluing their currencies. This makes it very hard for our manufacturers and farmers to fairly export their goods,” Trump also said on Twitter.
A third tweet from Trump added: “US markets are up as much as 21% since the announcement of tariffs on 3/1/2018.”
Trump’s Section 232 tariffs, a 25% tariff on imported steel and 10% on imported aluminium, came into effect on March 23, 2018.
In May 2018, the US government announced that it reached agreements in principle with Argentina, Australia and Brazil with respect to steel and aluminium quotas
. Argentina subsequently secured a “permanent exemption”
from the tariffs.
Brazil is currently the second-largest exporter of steel to America, providing the country mainly with semi-finished products. Argentina is among the 10 largest aluminium exporters to the US.
Under the quotas imposed by Section 232, Brazilian mills can supply the US market while not subject to the 25% tariff with up to 4.2 million tonnes of steel per year. Most of this total - some 3.5 million tonnes - is semi-finished goods, mainly slab. ArcelorMittal Tubarão, Companhia Siderúrgica do Pecém (CSP) and Ternium Brazil are the main sellers.
Imports of Brazilian steel, however, cannot total more than 30% of the annual quota during each quarter. Trump's announcement comes at a time when steelmakers are negotiating second-quarter supply deals to the US
at higher prices.
Fastmarkets' most recent price assessment for steel slab export, fob main port Brazil
was $360-380 per tonne on November 29, up from $355-380 per tonne a week earlier and higher than the 2019 bottom of $345-355 per tonne on November 15. Offers to the US and Canada were being made at $380-390 per tonne.
Because Brazil did not agree to a quota system for aluminium, it is therefore charged the 10% tariff for that material.
Argentina, on the other hand, can export almost 181,000 tonnes per year of tariff-exempt aluminium to the US
. Aluar is the sole domestic producer.
This quota for Argentinian aluminium represent around 40% of Aluar's capacity of 460,000 tpy of primary aluminium.
The South American country also agreed on an export quota on steel of roughly 180,000 tpy
Argentina's economic crisis since late in the third quarter of last year has resulted in a significant loss of value for the peso against the dollar. On September 3, 2018, $1 bought 36.91 Argentinian pesos; the dollar was at 59.92 pesos on December 2 this year.
The value of the Brazilian Real value has also plummeted, especially in November amid political turmoil in the country.
Former president Luiz Inácio Lula da Silva was released from jail following a decision from the Supreme Court, calling for street demonstrations against the current administration. Officials, congressmen linked to President Jair Bolsonaro and Bolsonaro himself mentioned a rights-restriction law from the military dictatorship called AI-5 as a possibility if protests escalated
The dollar was at 4 Reais on October 1 but weakened to 4.24 Reais on December 2. This compares with 3.87 Reais on December 3 last year.