US commerce wars are warming up: U.S. companies are bringing new trade lawsuits against their foreign competitors with a scope and frequency not seen in more than 15 years, government documents show, as a wave of new complaints builds under President Trump.
A Washington Post analysis of Commerce Department data found 23 new trade disputes initiated since January, making 2017 the busiest year for tariff cases since 2001. The new cases target trade between the United States and 29 countries, the most in any year since 2001.
The cases include fights over Korean washing machines, Spanish olives, Chinese aluminium foil, Vietnamese tool chests, Argentine biodiesel and Canadian jetliners. The U.S. trade warriors include financially strapped solar panel manufacturers, downsizing Rust Belt steel plants and declining California olive farms.
The surge of complaints comes as the White House moves to redefine America’s role in the global economy.
“At President Trump’s direction, we have told American businesses that we will be more enforcement-minded than any recent administration, while also remaining committed to a fair and transparent process that is professionally and impartially implemented,” Commerce Secretary Wilbur Ross said in an emailed statement. “They know we will stand with American workers in the face of unfair trade practices.”
Tariff cases typically start when U.S. companies formally accuse foreign competitors of “dumping” products in the United States at unfairly low prices or benefiting from unfair subsidies or both. Then the Commerce Department and a quasi-judicial U.S. agency called the International Trade Commission decide what to do.
Ross has said he wants the government to bring more cases on its own, something that could let companies save on legal expenses. The Commerce Department took its first step in that direction in a November tariff action against sheet metal distributors in China, the first government-initiated action since 1985.
The Washington Post’s count of 23 new disputes in 2017 is based on the number of petitioners bringing new tariffs; if for example, a single U.S. company asks for tariffs on products from 10 countries, the Post treated it as a single new dispute even though such an action would spur 10 Commerce Department investigations. When calculated based on the number of new investigations — as the Commerce Department tends to represent the trend in its news releases — there were 79 new investigations in 2017, reflecting a massive 65 percent jump over the previous year and a 16-year high.
Since most of the new cases are just beginning to work their way through the government’s deliberative process, it is too early to tell whether they will ultimately succeed.
Some companies are pushing for price quotas, which forbid foreign firms from selling below a given price. And in two cases this year, three companies have invoked a powerful and seldom-used U.S. trade lever called the “safeguard” provision, which imposes blanket taxes on products regardless of the country of origin. Such cases are unique in that they require a direct sign-off from the president; before Trump took office, no company had asked to be safeguarded in this way since 2001.
“The fact that we have already seen two of these cases in 2017 should be a clear signal that corporate America thinks the Trump administration is going to grant it protection,” said Chad Bown, a fellow at the Peterson Institute for International Economics, a research and policy organization focused on global trade.
The U.S. companies seeking tougher import duties argue that trade restrictions are needed to level the economic playing field and sustain American jobs, and have little to do with politics or Trump.
For instance, a Washington state paper company known as North Pacific Paper, called NORPAC, is accusing Canadian competitors of flooding the U.S. market with less expensive product. As a result, NORPAC, which sells paper for newspapers and other industries, said it has been forced to trim its staff from about 450 to 350 employees in the past year.
Meanwhile, two family-owned olive farm conglomerates, Bell-Carter Foods and Musco Family Olive, are asking the Commerce Department to counteract Spanish olive farmers that they say are propped up by an elaborate system of farm subsidies there.
A coalition of U.S. biodiesel manufacturers claims rivals in Indonesia and Argentina are selling their product in the United States at unfairly low prices. It says the Argentine government also is giving tax breaks to exporters to unfairly subsidize the industry.
Two companies asking for blanket “safeguard” protection — Georgia-based Suniva and Oregon-based SolarWorld USA — are solar panel manufacturers that make photovoltaic cells, the tiny chips that convert solar energy into usable power.
Over the past few years, they claim a flood of less-expensive components from Chinese solar manufacturers have put them at a disadvantage; the two firms have since filed for bankruptcy and have laid off thousands.
Their claim, however, does not have the backing of others in their industry: the trade group Solar Energy Industries Association opposes the tariff, which it argues will cause 88,000 jobs to be lost elsewhere in the industry. The International Trade Commission ruled in SolarWorld’s and Suniva’s favour in October, but the two companies said the duties it recommended are too small.
Others seeking tariffs are not suffering nearly as badly. The third company asking for broader safeguard protection — Benton Harbor, Mich.-based home appliances giant Whirlpool — logged $5.4 billion in sales this year.
But Whirlpool’s profit margins have been dwindling for years, in part because it claims it is losing market share in a key product category — washing machines — to Korean manufacturers LG and Samsung. Whirlpool argues they have been dumping washing machines in the United States for years and moving their production centres around the world to avoid earlier tariffs.
In arguing against tariffs, the foreign companies have pointed out that they also employ Americans.
“No one should doubt our commitment to creating jobs in the U.S. We have been marketing our products here for nearly 40 years and have more than 18,000 workers,” Samsung senior vice president John Herrington said in a statement rebutting Whirlpool’s tariff request. “We know what it means to be an American manufacturer, we are an American manufacturer, and we are in it for the long run.”
Several of the companies asking for import protection is actually under foreign ownership. They include the U.S. subsidiary of Nan Ya Plastics. The Taiwanese plastics manufacturer is asking for new restrictions on Korean and Taiwanese polyester products as part of a long-running trade dispute.
A U.K.-based metals conglomerate called Ferroglobe has asked for U.S. restrictions on silicon metal from Australia, Brazil and Norway. It is waging a parallel trade war in Canada, where it is asking for new restrictions on silicon imports from four countries.
DAK Americas, the North Carolina-based subsidiary of one of Mexico’s largest textile firms, is teaming up with Indorama Ventures USA, the U.S. arm of an Indian firm. They are asking for restrictions on textile products from Brazil, Indonesia, Korea, Pakistan and Taiwan.
The complex international connections of those asking for tariffs — and the often strong U.S. presence of the companies they are targeting — illustrates a problem for import duties: Foreign companies that find themselves slapped with tariffs can sometimes avoid them by moving production to a third country, or even to the United States.
“Tariffs really don’t work . . . if you apply a tariff they can still move that good through another country,” Barry Zekelman, chief executive of Illinois-based steel pipe manufacturer Zekelman Industries, told the cable channel CNBC earlier this summer.
Zekelman is teaming up with four other steel firms — ArcelorMittal, PTC Alliance, Webco Industries and Michigan Seamless Tube — to call for a broader system of quotas that would set fixed minimum prices for foreign firms.
Steel companies like Zekelman — which account for about half of the new requests in 2017 — got a tease of broader-reaching action when early in Trump’s term the White House announced it is investigating whether to label foreign-made steel and aluminium a national security risk, something that would impose harsh restrictions on foreign steel imports.
That effort, though, has been stalled for more than six months. In a July 25 interview with the Wall Street Journal, Trump said any action on speciality metals is “waiting till we get everything finished up between health care and taxes and maybe even infrastructure.”
Then on Nov. 28, the Commerce Department took the highly unusual step of bringing a tariff case on its own, asking for tariffs above 57 percent on aluminium sheet metal from China. Officials insisted the effort was separate from the earlier speciality metals investigation.
In a shift from past years, some companies bringing cases are faring relatively well against their rivals.
Boeing is one of the largest U.S. exporters, a company that maintains healthy profit margins selling commercial jets to airlines and advanced weaponry to the U.S. military.
None of that stopped the Chicago-based aerospace manufacturer from claiming in an April 27 complaint that it has been illegally harmed by Canadian jet-maker Bombardier’s 2016 deal with Delta Air Lines for 75 CS100 jetliners, asking for tariffs on 100- to 150-seat jets from Canada, a category in which Boeing does not compete.
Boeing’s lawyers may be emboldened by a 2015 trade law that made it easier for profitable corporations to win U.S. trade disputes. The Trade Preferences Extension Act of 2015 bars the International Trade Commission from turning down trade cases purely on the basis that the petitioning company is profitable.
The Commerce Department surprised the aerospace industry in September when it ruled in Boeing’s favour, proposing a massive 300 percent import duty that would make U.S. sales untenable for Bombardier.
But Bombardier may have already found a way to avoid the new fee. The company recently agreed to sell the rights to the CS100 to Airbus, a French manufacturer that is Boeing’s primary competitor in the commercial jet market. And the announcement came with a twist: Future production of the C-series aircraft would be shifted from Canada to Alabama, where Airbus already operates a production facility.
“It’s not intended to circumvent anything, but the fact is that when you produce an aircraft in the U.S. it’s not subject to any U.S. import tariff rules,” Bombardier president Alain Bellemare said in October.