The Trump administration’s efforts to block imports are bringing back a long-forgotten headache for manufacturers: the quota.
U.S. officials have so far largely relied on tariffs—essentially taxes at the border—in their efforts to reduce imports of steel, aluminum and Chinese goods. But some countries are accepting hard limits, or quotas, on their shipments as they strike deals with the Trump administration to avoid the tariffs.
The shift toward quotas began after President Donald Trump said in March that he would impose world-wide tariffs on steel and aluminum imports on national security grounds. Broad barriers, he argued, were needed to protect American metals producers from a glut emanating from China.
Most U.S. steel imports come from American allies, and Mr. Trump offered some of these countries temporary exemptions from the 25% tariff on steel and 10% tariff on aluminum while they negotiated deals to avoid the levies.
South Korea was the first country to reach such a deal. The country agreed to amend its trade agreement with the U.S. and accepted a quota capping its U.S. steel exports at 70% of the average export total over the past three years.
Brazil, Argentina and Australia are also facing potential quotas, while the European Union, Canada and Mexico are still in talks ahead of the June 1 deadline for when the tariffs would kick in.
“In all of these negotiations, the administration is focused on quotas that will restrain imports, prevent transshipment, and protect the national security,” the White House said in a statement on April 30.
EU officials have bristled at quotas, so-called voluntary export restraints and other mechanisms by which countries agree to limit their trade, saying those pacts violate World Trade Organization rules.
Through existing agreements, the U.S. has numerous quotas on imports that are tracked by U.S. Customs and Border Protection. But most of these are on agricultural items, including beef from Australia, raw sugar from the Dominican Republic and chocolate from Ireland.
Now, U.S. industry groups are worried that hard quotas will prevent them from getting needed specialties items at any price if exports have reached their cap for the year.
“The recently announced quotas are even more problematic than tariffs as they add significant complexities and restrictions on supply chains—completely stopping the importation of steel from certain countries regardless of the domestic need for ongoing projects around the country,” said Aaron Padilla, senior adviser on international policy at the American Petroleum Institute.
Ann Wilson, senior vice president at the Washington-based Motor Equipment & Manufacturers Association, said auto suppliers she represents “need to have a consistent access to specialty steel and aluminum just to continue to manufacture in this country.”
For South Korea, the steel quota—set at 2.63 million tons a year—is creating a daunting task for scores of the country’s firms. South Korea is the largest importer of Chinese steel and the third-largest steel supplier to the U.S. Lawmakers and labor leaders in Washington have long blamed South Korea for dumping steel on the U.S. market at unfairly low prices, while the U.S. trade deficit with the country was a consistent target for Mr. Trump, who is seeking to protect domestic industry with an “America First” trade policy.
The first four months of this year show the complications involved: Nine out of 54 categories of South Korean steel exports to the U.S. have already had their annual quota filled. Additional hot-rolled bars, used in construction, and silicon electrical steel sheets, used to make transformers and motors, that are imported will have to be destroyed, confiscated or delayed until next year.
Besides the annual quota for South Korean steel, there is also a quarterly limit, and any steel imports exceeding it face delays in warehouses, redirection to foreign trade zones or destruction, according to U.S. Customs and Border Protection.
To comply with the U.S. quota, Seoul’s trade ministry, which negotiated the steel quota deal, has asked the country’s steel manufacturers’ association to work out details on how to apply the quota to individual members and implement new rules in trade. “From nine to five almost every day, steelmakers in groups have gotten together at the conference rooms for hours of talks per each session in the past several weeks,” said Lee Minu at the Korea Iron & Steel Association’s communications team.
‘Some Korean steelmakers still think we may have agreed to the quota rashly’
—Yim Hwang-bin, a strategic planning team manager at Nexteel
Starting next week, South Korean steel firms are required to report U.S.-bound steel shipment plans and get approval from the association in advance, he said.
Nexteel Co., a midsize South Korean steel mill specializing in manufacturing oil pipes for the U.S. markets, including the energy industry, is considering relocating part of its facilities to the U.S. in response to the quotas. The company has already suspended most of its exports to America this year because of previously imposed U.S. tariffs over alleged dumping.
Yim Hwang-bin, a strategic planning team manager at Nexteel, said the quota is a double whammy for the company, which has cut its payroll at home by nearly half this year. “Some Korean steelmakers still think we may have agreed to the quota rashly,” Mr. Yim said.
The U.S. has also previously imposed 6.75% tariffs on SeAh Holdings Corp. and other Korean oil pipe makers. “Having been in the U.S. markets for nearly four decades, we’ve never stopped exporting steel there,” said Lee Yoon-ah, a spokesman for SeAh, which makes pipes. “But we will never likely return to the same good pace of steel exports to the U.S. as before.”