Photographer: Krisztian Bocsi/Bloomberg

Trump's Steel Wild Card Hangs Over G-20

  • U.S. said to tell Canada any steel measures won’t hit country
  • Merkel seeks G-20 steel solution to avoid ’bilateral actions’

At Donald Trump’s last global summit, climate policy was his wild card -- he threatened to quit the Paris Agreement while other leaders sought a united front on the environment.

This time around, leaders signaled that steel is a sticking point.

Trump’s looming decision on punitive steel tariffs hangs in the air as Group of 20 leaders meet in Hamburg with trade among the most divisive issues. Attendees include the U.S. president and China’s Xi Jinping, whose country has long been the target of steel dumping complaints. As the meeting’s first day wrapped up, leaders indicated that steel remains one of the hottest subjects of debate.

"There is a chance to solve the topic of steel overproduction multilaterally, that is within the G-20 group," German Chancellor Angela Merkel said on Friday at the summit, urging fellow leaders to find a common solution to steel overproduction. Otherwise, the risk of "bilateral actions" increases, Merkel said. Italian Prime Minister Paolo Gentiloni said steel “is a key question and an open one.”

Trump’s administration is weighing whether to impose tariffs, quotas or a combination of both on steel imports under national security grounds through Section 232 of the Trade Expansion Act, even though only a fraction of U.S. steel is used for defense. Trump’s Commerce Department launched its review in April, missed a self-imposed deadline for a decision last month and is expected to announce a verdict soon.

Allies Affected

The investigation is peculiar in that the top providers of steel to the U.S. are allies, led by Canada, both the U.S.’s top importer and exporter of steel. Any penalties could have a ripple effect on other trading partners and allies such as Germany, Japan, Russia, South Korea and Mexico, all major steel exporters to the U.S.

Prime Minister Justin Trudeau’s government has been privately assured by the U.S. that Canada won’t be affected by any steel measures, according to a Canadian government official, who spoke on condition of anonymity as Trump weighs his next move. Trudeau has said it’s unlikely Canada will be affected.

The tension over steel evokes the confrontations at the Group of Seven summit in May, where leaders haggled over climate policy before eventually settling on a six-against-one stance with Trump as the outlier. Days afterward, Trump announced he’d yank the U.S. out of the Paris climate accord.

‘Terrified’

"It’s a hard issue and it can be a very provocative issue," said Thomas Bernes, a former International Monetary Fund and World Bank official who is now a fellow at the Centre for International Governance Innovation based in Waterloo, Ontario.

European countries would prefer a multilateral solution on steel, he said. "Everyone is terrified" that any U.S. measures on steel "would be a unilateral action and would open up the floodgates for other countries to do the same," he said.

At last year’s G-20 summit in Hanghzou, China, leaders agreed that "structural problems including excess capacity in some industries" was hampering trade and employment, specifically citing steel. It created a Global Forum on excess steel capacity and called for more information sharing, to be facilitated by the OECD.

Several G-20 leaders criticized that the new global forum was working too slowly, Merkel said Friday. She said she’s seeking to find a solution by the time the G-20 ends on Saturday.

— With assistance by Joe Deaux

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