Does anyone want to take a punt on where the U.S. tariffs on steel and aluminum will go?
I think the first to move will be Canada, who will see it as a direct threat against its own huge steel and aluminum industry, as well as a direct threat to its massive car parts industry.
The Rules of Origin requirements within the CPTPP (of which Canada is an impending signatory) are used to determine the country of origin of a product for purposes of duties and restrictions imposed under the rules of the proposed CPTPP and other trade and investment deals, and they are critically important in the U.S. automotive and parts industries, which play a critical role in trade within NAFTA, and in trade with Japan and other TPP partners.
Or at least, they would have been if the U.S. had signed up. Under the CPTPP, signatory partners could have got preferential access to U.S. markets for goods with a lower share of domestic content than in prior agreements, especially the NAFTA.
I do not yet know how the special appendix on auto marts in CPTPP is going to get pulled in to this. So far I’m just reading share market result of auto makers, and the whole of the market is spooked on Trump’s destabilization.
Either way, an’t no frickin’ way the U.S. is getting into CPTPP after this.
I think the second to move will be Europe, who will of course work with Canada against the U.S. under their pretty advanced own trade agreement. I would expect the counter-measures to start with luxury goods – because that is where decision-makers get hurt the hardest.
Somewhere down the list will be the Australian and New Zealand steel and aluminum producers. That means: every one of those businesses and their staff are rapidly recalculating how much business they are now going to lose to the U.S. manufacturers. Rio Tinto in Bluff, and Bluescope Steel in Waiuku, will be running numbers about their marginal business viability. We don’t need reminding that we are a marginal electricity price proposition, but it’s about to happen again. Need I say thousands of our jobs?
If you every wondered why multilateral trade orders exist, you’re about to get your first global lesson in a long time, and it has simply massive implications here in New Zealand. A mighty sting. And all those Prime Ministers and Presidents will be pulling out their CPTPP-signing pens as fast as they can unbutton their jackets.
But the one to watch is China. Expect no sudden moves, other than further takeovers to consolidate vertical control of the entire auto industry and indeed the entire East Asian production system from materials to sales to consumer preferences. As much as they can, they will ensure that not even cheaper materials price disturbs their global control of automotive manufacturing.
Price isn’t everything, but for commodity producers like New Zealand, it’s most things.