Adds Fed reaction on trade friction in last two paragraphs
The US may delay imposing tariffs on imported steel and aluminum from some countries as they negotiate permanent exclusions, but not many exemptions are expected.
US Trade Representative Robert Lighthizer today told the Ways and Means Committee of the House of Representatives that the administration of President Donald Trump is in discussions with the European Union, Australia and Argentina to exclude them from the 25pc tariff on imported steel and 10pc tariff on imported aluminum set to take effect on 23 March.
Lighthizer also singled out Brazil as a candidate for exemption based on its unique position as a supplier of semi-finished steel products to Brazilian affiliates operating in the US.
Still, "I don't think you are going to see a lot of exclusions done," Lighthizer told Congress.
The administration may delay imposing the tariffs on countries with whom it is negotiating exemptions in order to maintain the US' commercial relationships, Lighthizer said.
Negotiations are ongoing, but the administration hopes to resolve any country exclusions by the end of April.
Lighhitzer expects any country exempted from the tariffs to assist the US with problems like global overcapacity and transshipment that plague the steel and aluminum industries.
Trump in his executive orders authorizing the tariffs excluded Canada and Mexico amid renegotiation of the North American Free Trade Agreement (Nafta).
South Korea is expected to be excluded from the tariffs on similar terms as the US renegotiates the US-Korea Free Trade Agreement, known as Korus.
An exclusion for South Korea would come even as steel industry executives have singled out the country as a major transshipper of Chinese steel.
In testimony today before members of the US Congress' Steel Caucus, Steel Dynamics chief executive Mark Millett said that South Korea, the top destination for Chinese steel exports, and other countries "import vast quantities of dumped and subsidized steel from China to make further processed steel products that are then shipped to the US."
"It is clear to see the direct connection between China's steel exports to Korea and Korea's pipe and tube exports to the US," Tony Frabotta, a vice president at US pipe and tube manufacturer Zekelman Industries, said.
South Korea was the third largest exporter of steel to the US in 2017 behind Canada and Brazil, at 3.6mn t. Oil country goods such as pipe and tube represented nearly a third of US imports from South Korea, rising to 1.1mn t from 310,715t in 2016.
The administration may also exempt individual steel and aluminum products after downstream steel and aluminum users in the US opposed the tariffs on the grounds that the steel and aluminum they depend on is not produced domestically. Such exclusions may also be sought by US-based finished steel and aluminum producers who rely on semi-finished products from outside the US to feed production.
Trump delegated product-based exclusion authority to Commerce Secretary Wilbur Ross. Ross began accepting exclusion requests Monday, but none have been granted to date.
Separately, new Federal Reserve chair Jerome Powell said trade concerns following announcement of the tariffs was a "new risk... that has become a more prominent risk to the outlook" for the economy and inflation.
Powell, speaking at his first press conference as Fed chair, said Federal Reserve board members and staffers, in their talks with business leaders, had heard that trade policy had "become a concern" for those groups since the announcements of the tariffs and possible countermeasures.
