U.S. Commerce Department Expands Steel Tariffs to Include Derivative Products

The update is meant to get at foreign producers’ attempts to get around the duties.

Late last week the U.S. Department of Commerce announced it is expanding the 50% tariffs that exist on nearly all foreign-made steel to include derivative imported products.  The new rules appeared in the Federal Register on Tuesday.

What does “derivative” mean here? It means products that are downstream from that steel; that derive their core utility from the value of that steel content. By including such derivative products under the tariffs, the government hopes to stymie foreign producers’ attempts to get around the existing duties. Think of American auto parts companies, for instance, moving their production to Mexico and using foreign stainless steel to make their exhaust pipes, then selling the “derivative” product in the United States tariff-free.  

Remember, global steel markets for years have been in a state of chronic overcapacity, meaning there are far more operating steel mills out there than is needed to meet global demand. The Section 232 steel tariffs, first raised in 2018 and under which these tariffs fall, are meant to protect U.S. national security by shielding our domestic steelmakers in their home market from this glut of imports that are often dumped here for less than their fair market value. But, by allowing derivative products into the market with a free pass, the tariffs were being undermined. That’s part of what makes these rule changes so important: It will make existing tariffs more effective and harder to evade.   

Cleveland-Cliffs, a domestic steel manufacturer that makes electrical steel and stainless steel (both now covered by the new derivative rules), applauded the ruling.

“Today’s action taken by the Secretary of Commerce gives us certainty that the American domestic market will not be undercut by unfairly traded steel embedded in derivative products,” said CEO Lourenco Goncalves in a statement Monday. “That allows us to continue to invest in our stainless steel operations in Coshocton, OH and Mansfield, OH, as well as in our electrical steel operations in Butler, PA and Zanesville, OH, in support of our domestic clients producing Made in USA cars, appliances, and electrical transformers.”

You can read the whole statement here.