President Trump is abruptly reimposing tariffs on steel and aluminum imported from Brazil and Argentina.
Trump announced the move in a pair of tweets Monday, saying he was acting in response to "massive devaluation" of the two countries' currencies. Brazil and Argentina had been exempted from Trump's 25% tariff on imported steel and his 10% tariff on imported aluminum since May of last year.
Brazil is a major supplier of imported steel to the U.S. The declining value of currencies from Brazil and Argentina has given their exports an advantage in international markets, which Trump said is bad for U.S. farmers.
During the global trade war, China has cut back on purchases of U.S. farm goods such as soybeans and turned to South America for alternative supplies.
In his tweets, Trump also called on the Federal Reserve to cut interest rates further in hopes of weakening the dollar, which would give a lift to U.S. exports.
"Lower Rates & Loosen," Trump wrote, arguing that a strong dollar "makes it very hard for our manufacturers & farmers to fairly export their goods."
.....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 manufactures & farmers to fairly export their goods. Lower Rates & Loosen - Fed!— Donald J. Trump (@realDonaldTrump) December 2, 2019
While interest rates do affect the value of the dollar, the Federal Reserve has not traditionally been guided by that. Instead, the central bank aims for stable prices and maximum employment, leaving currency policy to the Treasury Department.
Trump has repeatedly urged the Fed to cut interest rates. The central bank has cut rates three times since July, by a total of 0.75%. Fed officials are widely expected to leave rates unchanged when they meet next week.
Trump originally imposed the steel and aluminum tariffs in March of 2018, relying on authority from a seldom-used law from the 1960s, designed to protect domestic industries deemed vital to national defense.
The move did give a temporary lift to American steel and aluminum makers. However, it also raised prices for U.S. companies that use the metals. Since then, steel prices have fallen amid slumping demand. U.S. Steel announced layoffs this fall and posted a third-quarter loss of $35 million.
NOEL KING, HOST:
President Trump is reimposing tariffs on steel and aluminum imported from Brazil and Argentina. The president announced that news on Twitter this morning. NPR chief economics correspondent Scott Horsley is here to explain what's going on. Hi, Scott.
SCOTT HORSLEY, BYLINE: Good morning, Noel.
KING: OK, so Brazil and Argentina were exempted from steel and aluminum tariffs in the spring of 2018. What happened?
HORSLEY: In his tweets this morning, the president accused these two countries of what he called massive devaluation of their currencies. Cheaper currency does give these countries' exporters an advantage in international trade. And Brazil is a pretty big exporter of steel to the United States, Argentina less so. In his tweet, though, the president did not talk about that competition hurting domestic steelmakers. Rather, he referenced competition for U.S. farmers, who are obviously an important constituency of the president - political constituency. What's really been hurting farmers, along with some pretty bad weather, is the president's trade war with China. When China dialed back its purchases of U.S. soybeans, for example, during that trade war, it did look to countries like Brazil as an alternate source of supply.
KING: It seemed over the past few months that some of the tension over trade was cooling off. Were things not as they seemed?
HORSLEY: Yeah, you know, there had been some signs of progress. There's talk of a trade agreement being finalized with Mexico and Canada. There is talk about at least a mini trade deal with China. Investors on Wall Street have certainly embraced that, more or less pricing in the idea that trade peace could be close at hand. Now maybe that confidence was misplaced. You know, last week, I, spoke with a manufacturer in Minnesota who said that he's really being hurt by the tariffs - not just the cost but also the uncertainty. He said it's hard to make a decision or an investment when tariff policy can change with a tweet. And we got another reminder of that possibility this morning.
KING: Now, in those same tweets this morning, the president also asked the Federal Reserve to take action. He mentioned currency manipulation, currency devaluation in Argentina and Brazil. What does he want our central bank, the U.S. central bank, to do?
HORSLEY: He wants the Fed to act so that other countries can't - what he said - take advantage of the strong dollar. This is an interesting request because, ordinarily, it's the Treasury Department that steers U.S. currency policy, not the Federal Reserve. The central bank's mandate is stable prices and maximum employment, not driving down the dollar in an effort to boost exports. But the Fed does set interest rates. And, of course, that affects the value of the dollar. So in - what the president's really asking here in another set of words is what he's been asking for all along, which is for the Fed to lower interest rates even further. The central bank has already cut interest rates three times since July. And Fed officials are generally expected at this point to leave rates unchanged when they meet next week.
KING: Let me ask you to pull back 3,000 feet and get the larger view here. The president has long said that tariffs on imported steel and aluminum were going to help U.S. industries. Ultimately, is that what has happened here?
HORSLEY: Not really. You know, steelmakers did get an initial boost last year when the tariffs first went into effect, and the price of steel went up. Of course, that was hard on companies that use a lot of steel. And there's more of those than there are steelmakers. Since then, though, the price of steel has actually slumped again, partly as a result of falling demand. In the third quarter, U.S. Steel, for example, actually lost money. And it's announced layoffs of some workers. So the tariffs have created a lot of uncertainty, created a lot of angst, but they haven't necessarily been a lasting boost for domestic metalmakers.
KING: OK. And now some more uncertainty this morning for Brazil and Argentina. NPR's Scott Horsley. Scott, thanks so much for your time.
HORSLEY: You're welcome. Transcript provided by NPR, Copyright NPR.