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World Exemptions seen as way to handle tariff for allies

More than 100 Republican lawmakers implored President Donald Trump to drop plans for stiff and sweeping steel and aluminum tariffs as the White House prepared to formalize the measures Thursday afternoon. Officials said late Wednesday that the plan would initially exempt Canada and Mexico and could ultimately exclude other allies.

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Manny Burgos paints goalposts at Sportsfield Specialties in Delhi, New York, Dec. 11, 2012. President Donald Trump is expected to formally sign off on stiff tariffs on steel and aluminum imports on March 9, 2018, and businesses like Sportsfield Specialties, which makes soccer goals and aluminum team benches, could be affected. play

Manny Burgos paints goalposts at Sportsfield Specialties in Delhi, New York, Dec. 11, 2012. President Donald Trump is expected to formally sign off on stiff tariffs on steel and aluminum imports on March 9, 2018, and businesses like Sportsfield Specialties, which makes soccer goals and aluminum team benches, could be affected.

(Nathaniel Brooks/The New York Times)

Peter Navarro, a top White House trade adviser, said Wednesday night that the president would hold a signing ceremony Thursday afternoon in the Oval Office. He said the tariffs would go into effect in 15 to 30 days.

“The proclamation will have a clause that does not impose these tariffs immediately on Canada and Mexico,” Navarro said in an interview on Fox Business Network. A permanent exclusion will hinge on those countries’ agreeing to a “great” trade deal in the renegotiation of the North American Free Trade Agreement, he said.

“We’re going to open this up for our allies to just see if we can work through this problem,” Navarro added.

Trump has said that the tariffs would apply to countries across the board and that any exemptions could open a Pandora’s box of requests for special treatment. That has prompted stiff blowback from trading partners, Republicans and the financial markets, which sank over fears that across-the board tariffs would trigger retaliatory action that stunts U.S. economic growth. It also prompted the resignation of Trump’s top economic adviser, Gary D. Cohn, who had argued against broad tariffs and said Tuesday that he would leave the White House in the coming weeks.

On Wednesday, 107 Republican members of the House of Representatives sent a letter to the president expressing concern about broad tariffs and calling for him to focus any action on unfair trading partners, like China.

“We are committed to acting with you and our trading partners on meaningful and effective action,” the letter said. “But we urge you to reconsider the idea of broad tariffs to avoid unintended negative consequences.”

The administration began talking more openly Wednesday about exemptions for countries that satisfy certain conditions, backing away from the bazookalike approach Trump announced last Thursday in a hastily arranged meeting with steel and aluminum executives.

In an interview Wednesday afternoon with Fox Business, Wilbur Ross, the secretary of commerce, said countries would be exempted if it served U.S. national security interests. “It’s defined to include effect on employment. It’s defined to include effect on individual industries. It’s not the conventional definition of national security,” he said.

Trump appears to be taking advantage of the vacuum created by the resignation of Cohn, who was the plan’s loudest opponent, to push the tariffs through. Cohn, who argued that tariffs would create a global trade war, found himself overshadowed by a group of more protectionist-minded advisers who have urged the president to follow through with the get-tough pledges he made during his campaign.

Those advisers have been in ascendance, including Navarro, a trade skeptic who had been sidelined by Cohn. Navarro was recently promised a promotion and made the rounds on Sunday talk shows to promote Trump’s trade policy. Ross succeeded in moving up last week’s announcement, over the objections of Cohn. Robert Lighthizer, the U.S. trade representative who has pushed trading partners to accede to the country's demands, has become a trusted adviser to the president.

That group has a much more binary view of trade, seeing it as a zero-sum game in which the United States is losing. The advisers have pushed the president to withdraw from trade deals like NAFTA and to carry out the type of stiff tariffs that Trump seems poised to impose on steel and aluminum imports. They see the United States' ballooning trade deficit, which hit a nine-year high Wednesday, as evidence that more needs to be done to put the country on the winning end of global trade.

The rise of the populist faction is already fanning fears on Wall Street and among foreign officials that Trump could start and escalate a global trade war or take a more combative stance toward trading partners and international groups like the World Trade Organization. Foreign officials viewed Cohn as a reliable ally on global economic issues and as someone who could express their views to the president.

The prospect of tariffs has set off lobbying from governments around the world, who have tried to sway the administration with offers of friendship and threats of retaliation. On Wednesday, the European Union released a list of U.S.-made goods it would penalize if the tariffs went through.

China cautioned that it was prepared to “make an appropriate and necessary response” should the United States impose the tariffs.

“Choosing a trade war is surely the wrong prescription,” China’s foreign minister, Wang Yi, said during a news conference Thursday in Beijing. “In the end, you will only hurt others and yourself.”

Many companies and unions, including the United Steelworkers, have pushed for Canada to be exempted from the plan. The country is the largest source of both steel and aluminum for the United States, and many companies have operations stretching across its border. Jim Mattis, the defense secretary, has also urged Trump to proceed cautiously, particularly with regard to allies.

“Hopefully as the administration works their way through the application of these tariffs, they’ll look at targeted tariffs against the worst violators,” said Leo Gerard, president of United Steelworkers.

But others close to the administration pushed back against the idea of exclusions. Dan DiMicco, trade adviser to Trump during his campaign and a former executive at Nucor Corp., a steel firm, said he did not see recent comments about potential exclusions to be “an indication of some massive change in an approach to a fixed tariff across the board.”

“The one thing they have committed to is having an exclusion process for certain products,” DiMicco said. “But there’s been nothing to indicate they’re backing away and going to be granting mass exclusions for countries.”

The United States plans to impose the tariffs by utilizing a little-used legal provision that allows the president to take action to defend national security. The administration argues that imports have degraded the industrial base necessary for the United States to make tanks, weapons and other military products.

But trade lawyers say that linking Canada and Mexico’s exemptions to NAFTA, as the administration is doing, could ultimately open the United States up to more legal challenges at the World Trade Organization. If Canada and Mexico could be excused from the tariffs for reasons unrelated to national security, that brings the administration’s entire rationale into question. If the World Trade Organization rules against the United States, it is unclear whether the Trump administration would listen to the ruling, or move to leave the organization.

Prime Minister Justin Trudeau of Canada, speaking before Navarro made his comments sounded cautious about the possibility of an exemption.

“We know from experience that we need to wait and see what this president will actually do,” Trudeau said in Toronto.

Terry Sheehan, a Liberal member of Parliament from Sault Ste. Marie, Ontario, a northern city dependent on a steel mill, said he spent most of Wednesday calling U.S. lawmakers to make the case for an exemption.

“Until we hear the president saying that there is an exemption, we will continue to do what we’re doing,” he said.

Mexican officials continued to say they would retaliate if the United States pressed ahead with tariffs. On Wednesday, top Mexican officials met with Jared Kushner, the president’s son-in-law and senior adviser, as he paid a state visit to President Enrique Peña Nieto at the presidential residence in Mexico City. It was unclear if tariffs came up.

Foreign Minister Luis Videgaray has developed a close relationship with Kushner, but the repeated contacts between the two have failed to sway Trump’s policies toward Mexico, characterized by a crackdown on unauthorized immigrants, an insistence on building a wall on the southern border and repeated threats to pull out of NAFTA.

Kushner and Videgaray had been planning on a meeting between the two presidents but the arrangement collapsed last month after a testy phone call between the two leaders.

Trump last week called an impromptu news conference at which he announced that he intended to place tariffs of 25 percent on imported steel and of 10 percent on imported aluminum. The tariffs would fulfill a key campaign promise, and they have garnered support from metal companies, from unions and from Rust Belt politicians.

The Federal Reserve, in its latest anecdotal survey of businesses released on Wednesday, said several regions “saw a marked increase in steel prices, due in part to a decline in foreign competition.”

Thomas J. Donohue, president the U.S. Chamber of Commerce, said his group was “very concerned about the increasing prospects of a trade war.”

“We urge the administration to take this risk seriously and specifically to refrain from imposing new worldwide tariffs on steel and aluminum,” he said.

This article originally appeared in The New York Times.

ANA SWANSON © 2018 The New York Times

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