By Josh Zumbrun in Washington, Paulo Trevisani in Brasília and Amrith Ramkumar in New York
President Trump said Monday he would raise tariffs on steel and
aluminum imports from Brazil and Argentina, surprising financial
markets and opening a new front in the global trade war.
The Trump administration also proposed tariffs of up to 100%
against $2.4 billion of French imports to punish France for a new
digital-services tax that hits U.S. technology companies. France
didn't respond Monday to the proposed action but it will have
several weeks to negotiate with the U.S. to avoid it.
The move to revive trade tensions over metals caught many
observers off guard, as the U.S. has been making conciliatory moves
on other trade fronts. The Trump administration is pressing to
strike a limited pact with China and congressional approval of a
new North American trade pact, and last month passed on an
opportunity to impose tariffs on foreign-made automobiles.
"Brazil and Argentina have been presiding over a massive
devaluation of their currencies, which is not good for our
farmers," the president wrote in a Twitter post Monday. "Therefore,
effective immediately, I will restore the Tariffs on all Steel
& Aluminum that is shipped into the U.S. from those
The White House didn't release an order on Monday outlining the
changes or explain why they were necessary, leaving key details
The U.S. began imposing global tariffs of 25% on steel and 10%
on aluminum in 2018. But before the metals tariffs went into
effect, Argentina and Brazil quickly hammered out deals to obtain
exemptions, agreeing instead to duty-free quotas. Other economies,
including the European Union and China, were subjected to the U.S.
Mr. Trump appeared on Monday to be alarmed by currencies that
have weakened in Brazil and Argentina due to slow economic growth
and political uncertainty. Argentina has faced a severe economic
and currency crisis since last year.
The weaker currencies have made their crops cheaper than U.S.
farm goods, creating another problem for U.S. farmers hard hit by
the Trump administration's trade action against China.
In response to that trade action, Beijing has ordered companies
to scale back purchases of U.S. farm goods. Brazil's soybean
farmers have benefited, supplying 77% of China's soybeans in the
nine months ended in May, according to the U.S. Department of
Agriculture, from about 40% before.
But few economists and analysts agreed with Mr. Trump's claim
that the two countries have been manipulating their currencies.
Currency manipulation occurs when countries purchase U.S. dollars
to weaken their own currencies, making goods on international
markets artificially cheaper.
Neither Brazil nor Argentina has been featured in the U.S.
Treasury Department's currency report, the official vehicle for
designating nations as manipulators.
"Brazil has had a free-floating currency for a long time now and
that isn't changing," said economist Carlos Kawall, chief
researcher at ASA Bank in São Paulo. "The real is weakening because
interest rates are going down and the dollar is strengthening
against emerging-market currencies."
In recent months, both Brazil and Argentina have instead taken
steps to sell dollars from their reserves to support their
plummeting currencies, the opposite of buying dollars as currency
"Of course Brazil doesn't manipulate the currency," said Monica
de Bolle, senior fellow at the Peterson Institute for International
Economics, nor does Argentina, she said. She said that Mr. Trump's
gambit could backfire if Brazilian and Argentine exports are hurt.
"Then their currencies will inevitably weaken," she said.
Brazil's government is discussing the issue with U.S. officials,
the country's Foreign Ministry said. "The administration will work
to defend Brazil's trade interests and secure commerce flow with
the U.S.," the ministry said. Brazilian President Jair Bolsonaro
said he would discuss the U.S. measure with his economy minister
and reach out to the American president if necessary. "I have an
open channel of communication with Trump," he said.
Argentine Foreign Minister Jorge Faurie spoke with U.S. Commerce
Secretary Wilbur Ross by telephone Monday to try to avoid the
tariffs, said a ministry spokesman, who declined to provide more
details. Argentina's steel or aluminum producers associations had
The move to ratchet up trade tensions caught markets off
U.S. stocks fell for the second consecutive session Monday, with
the S&P 500 slipping 0.9% for its largest one-day drop since
early October. The Dow Jones Industrial Average fell 1%. The
declines came after figures from the Institute for Supply
Management showed domestic factory activity slowed further in
November, missing expectations and damping hopes for a rebound in
"This took people by surprise," said Mohit Bajaj, director of
exchange-traded fund trading solutions at WallachBeth Capital. "I
wouldn't be surprised if people are willing to take an earlier step
to get out of positions just in case something might happen toward
the end of the year."
U.S. manufacturing and agriculture have slumped amid the
continuing trade dispute with China, rather than being boosted as
intended by the tariffs, and the stock market has typically
declined on days when trade tensions increase.
Many companies and economists have blamed uncertainty in U.S.
trade policy as causing a decline in investment. The industrial
slump has also pushed down domestic aluminum and steel prices amid
muted demand and steady supply, analysts said.
Shares of domestic metal producers have declined for months.
They had a mixed reaction to Mr. Trump's Monday tweet, with
aluminum producer Alcoa Corp. paring an earlier advance to close
down 0.1% and U.S. Steel Corp. rising 4.2%. The stocks are down 36%
and 41%, respectively, in the past year.
The latest action "underlines the whole malaise we're seeing on
the trade front," said Edward Meir, a consultant focused on metals
at brokerage ED&F Man Capital Markets. "We're looking at a very
dicey situation in December... I don't have a good feeling about
The legal basis for the metals tariffs is a Commerce Department
report saying global steel and aluminum imports threaten U.S.
national security. Trump administration officials have offered
other explanations as well, saying U.S. productive capacity in the
metals must be raised, that the tariffs are needed to counter
Chinese overcapacity in the metals, to combat currency manipulation
or to gain leverage in trade negotiations.
Mr. Trump has previously raised and lowered metal tariffs on
Turkey and other countries in moves attributed to everything from
foreign-exchange policy abroad to the detention of an American
evangelical pastor in Turkey.
The Brazil Steel Institute, which represents the country's
producers, said the decision to levy tariffs is "retaliation" that
goes against the two countries' partnership and will hurt U.S.
steelmakers that need semifinished exports from Brazil to operate
their own plants.
Brazil accounts for nearly two-thirds of the imported steel slab
coming into the U.S. One of the biggest users of Brazilian slab in
the U.S. is ArcelorMittal SA., which operates a rolling mill in
Calvert, Ala., under a joint venture with Japan's Nippon Steel
Corp. ArcelorMittal didn't respond to a request for comment.
Many U.S. lawmakers have criticized the use of a national
security law known as Section 232 to impose the tariffs. The move
is facing a federal court challenge, as well as challenges at the
World Trade Organization. The court challenges argue that the
administration hasn't followed legislative timelines and procedures
in imposing the tariffs and has penalized countries and allies that
aren't always accused of shipping dumped or subsidized steel.
"There is not even a pretense of 'national security' with these
tariffs" against Brazil and Argentina, said Chris Krueger, managing
director of the Cowen Washington Research Group. "This action is
ripe for retaliation and threatens to reshape currency
relationships and the rules of the game for foreign exchange
--Bob Tita in Chicago and William Mauldin in Washington
contributed to this article.
Write to Josh Zumbrun at Josh.Zumbrun@wsj.com, Paulo Trevisani
at email@example.com and Amrith Ramkumar at
(END) Dow Jones Newswires
December 02, 2019 19:27 ET (00:27 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.