AMSCI comment on the recent WTO Section 232 rulings

The recent losses sustained by the United States at the WTO when that body ruled in four related cases that section 232 steel and aluminum tariffs do not qualify for the GATT National security exception to WTO obligations were a predictable and unnecessary outcome that complicates U.S. efforts to develop a sound trade policy that promotes economic growth.

The adverse rulings were predictable because they follow previous WTO jurisprudence. It was entirely reasonable to expect that the panel hearing the disputes would follow prior interpretative logic. The rulings were also unnecessary, because the U.S. took the risk of a likely consequential loss in a high-profile case rather than end measures that protect a few, continue to harm American consumers, and contribute to inflation.

In addition, the WTO rulings hand China, one of the parties, a notable victory in a closely watched intergovernmental forum. This too is a completely unnecessary outcome, one that impairs U.S. diplomatic standing. Russia is a party to a separate pending case, and it is possible we may see a similar outcome in Russia’s favor.

The official U.S. response to the rulings, that it will not remove the offending measures, is highly regrettable. It means that American consumers will continue to pay higher prices for many manufactured goods due to the section 232 trade taxes. Prices of various metal-related residential construction inputs will continue to be inflated, pushing up housing costs even more during a time of rising interest rates. Higher input costs in the nonresidential construction sector inflate prices in that sector as well. Industry data show that the producer price index for nonresidential construction inputs is still far higher than the consumer price index over the October 2021 to October 2022 time period.

According to a December 2022 report by the 27,000-member Associated General Contractors of America, “With many U.S. mills and factories already at capacity, bringing in more imports at competitive prices will cool the overheated price spiral and enable many users of products that are in short supply to avoid layoffs and shutdowns.”

During the 2020 campaign, then-candidate Biden was asked whether he would keep the sitting President’s tariffs. He said that the tariffs weren’t a good idea, and that they harm American manufacturing. President Biden was right then, and he would be right to end them now.