According to the US, Brazil Will Have to Accept Quotas in Order to Avoid Steel Tariffs

04/13/2018 - 11h03

In a meeting with the Brazilian Minister of Foreign Affairs Aloysio Nunes, the US Commerce Secretary Wilbur Ross said that the quickest way for Brazil to become permanently exempt from steel tariffs would be to agree to a voluntary restriction on exports and the establishment of quotas - an arrangement similar to the one the US reached with South Korea.

Tariffs on steel (25%) and aluminum (10%) were suspended for Brazil, South Korea, Argentina, Australia and the European Union until April 30, while negotiations for the definitive relinquishment of such surcharges take place. The US is the country that most imports Brazilian steel, meaning the implementation of tariffs could lead the country to lose US$ 1.1 billion on an annual basis.

South Korea has signed an agreement pledging not to exceed a quota equivalent to 70% of its average level of exports over the last three years. Additionally, the country has further opened up its market for the importation of American cars. These two measures are what led South Korea to avoid tariffs.

However, the Brazilian government is resisting to agree to the voluntary reduction of exports given the losses that this could lead to in the sector, and it is not considering the possibility of making concessions on other products unrelated to steel.

Ross is claimed to have acknowledged that Brazil's situation is unique and that its steel sector plays a complementary role. The Brazilian government has argued that steel tariffs would directly hurt US steelmakers.

American Steelmakers import more than 80% of their semi-finished steel products from Brazil. They then transform them into parts that are sold to manufacturers of home appliances and automobiles, among others. It should also be noted that Brazil imports US$ 1 billion in US coal in order to make steel.

Translated by THOMAS MATHEWSON

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