U.S. Allies Eye Tough-on-China Approach to Avoid Trump Tariffs


U.S. allies seeking exemptions from President

Donald Trump’s

steel and aluminum tariffs are showing signs of coalescing around a common appeal: a promise to join forces with the U.S. in addressing a metal glut emanating from China.

Leading the negotiations with foreign governments is U.S. trade representative

Robert Lighthizer,

whose team will take into consideration arguments that are focused on national security, the legal basis for the Trump administration’s tariffs under Section 232 of a 1962 trade law.

People familiar with Mr. Lighthizer’s discussions with foreign counterparts say countries are arguing they shouldn’t have to pay the tariffs, announced earlier this month, if they have security partnerships with the U.S. They are further seeking favorable consideration if they agree to take measures addressing overcapacity—largely blamed on China—and ship products that don’t undermine production by American metals firms.

Some U.S. lawmakers and foreign officials have criticized the rollout of the tariffs and sought to learn more about how to obtain country exclusions and product exemptions. Mr. Trump has alarmed trading partners by asking for unrelated economic and trade concessions in order to avoid the tariffs he is imposing under a U.S. national-security law. He has also suggested additional barriers against European cars.

“We are in contact with U.S. counterparts to obtain more clarity,” the European Union’s trade chief,

Cecilia Malmström,

said Wednesday at the European Parliament.

China’s trade policies with the U.S. are a matter of increasing concern for the Trump administration, with a White House official on Wednesday confirming an administration goal to reduce the U.S. trade deficit with China by $100 billion. The administration is also working on a case targeting alleged Chinese theft of American intellectual property, which is expected to result in barriers on tens of billions of dollars in Chinese exports if implemented.

An EU official said that Mr. Lighthizer “indicated that there would be some criteria applied for country exclusions” and that “jointly tackling steel overcapacity is one.” To defend against dumped or subsidized products, the EU already has 53 measures in place on steel and iron products, 27 of which target China.

A spokeswoman for Mr. Lighthizer declined to comment.

When he last served as a Washington official in the Reagan administration, Mr. Lighthizer persuaded countries to agree to limit the shipment of products to the U.S. through “voluntary export restraints,” and two people following the steel debate say the idea has come up again this year in connection with steel and aluminum.

Mr. Lighthizer raised the possibility of allies limiting their steel and aluminum exports to the U.S. in exchange for obtaining waivers exempting them from the tariffs, an EU official said.

Countries looking to be carved out are making their case quickly because the tariffs are likely to be imposed as early as next week.

Australian Prime Minister

Malcolm Turnbull

said Monday that his country has a “commitment” that the U.S. will exempt it from tariffs.

Canada and Mexico, which are involved in negotiations with Mr. Lighthizer to overhaul the North American Free Trade Agreement, or Nafta, are excluded from the tariffs—for now. Some industry officials are pushing for a quota that would cap the amount of duty-free metal that the North American partners could send to the U.S. at around 2017 levels. At the moment no quota is expected, according to people briefed on the talks.

Canadian Prime Minister

Justin Trudeau

said Tuesday his government is prepared to work with the U.S. to ensure that Canada doesn’t become a conduit for cheaper steel imports from other countries.

Mexican Economy Minister

Ildefonso Guajardo

noted at a press conference Tuesday that more than two years ago Mexico imposed safeguard tariffs of 15% on basic steel products such as slab from countries with which it doesn’t have free-trade agreements.

Countries seen in Washington as national-security threats—or those linked to China’s overcapacity in steel—appear to have a disadvantage in seeking exemptions from the tariffs. Commerce Secretary

Wilbur Ross’s

original recommendation on tariffs included an option that targeted select countries for higher tariffs. Those countries include China and Russia—top countries of concern in the administration’s national-security strategy—but also South Korea, a major importer of Chinese steel that also ships large quantities of steel to the U.S.

If the Trump administration grants several country exemptions, possibly in exchange for deals limiting exports to the U.S., then the tariffs would less resemble the global metals barriers Mr. Trump announced last week and instead approximate the more targeted option Mr. Ross proposed, which largely spares U.S. allies, according to a person briefed by the administration.

South Korea, like Mexico and Canada, is currently involved in updating its free-trade agreement with the U.S., so Mr. Lighthizer is likely to consider the effect of any steel tariffs on those negotiations.

Mr. Lighthizer is set to meet U.K. trade secretary

Liam Fox

on Wednesday, and Canadian Foreign Minister

Chrystia Freeland

is also visiting Washington to discuss the metals tariffs and Nafta.

U.K. Prime Minister

Theresa May

discussed the tariffs with Mr. Trump on Tuesday and called for an exemption for the EU as well as a multilateral approach to tackling China’s steel and aluminum capacity, according to an embassy spokeswoman.

Write to William Mauldin at william.mauldin@wsj.com and Emre Peker at emre.peker@wsj.com


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