Stop Tariff Evasion In Its Tracks! The Trump Countermove

From the White House Office of Trade and Manufacturing

Substack Team,

This week the Department of Commerce made an announcement that intelligently extend steel and aluminum tariff coverage to stop tariff evasion by strategic gaming nations.

This provides some more texture for the press corps and general public. You may find it very interesting.

Peter Navaro

Tariff the Derivatives, Not Just the Metal

Whenever President Trump imposes a tariff on a product, foreign exporters to the U.S. try to strategically game the market to evade the tariff. One such form of tariff evasion of the Trump tariffs on steel and aluminum is the so-called “derivative product” back door.

Here’s how this gambit works: Keep the cheap slab, coil, or billet in the foreign country instead of exporting it and paying the tariff. Instead, do a little value-added before exporting – for example, make a motor housing, an appliance subassembly, or an electric vehicle (EV) rotor stack. Then, ship these derivative products outside the HTS Chapters 72/73 (steel) or 76 (aluminum) that the metals would otherwise have been tariffed in. That way, by moving a little downstream, the underlying metal waltzes right past the tariff line.

Now listen up: That sound you just heard is the Department of Commerce slamming that derivative products back door shut.

On August 19, the Commerce Department expanded Section 232 steel and aluminum tariffs to more than 400 additional derivative product categories—from wind-turbine housings, mobile cranes, railcars, and household appliances to EV-motor laminations, automotive exhaust assemblies, industrial compressors, and aerosol cans

That’s not the end of the story, however. President Trump has added a standing “inclusions” clause to the Section 232 framework under which the steel and aluminum tariffs are imposed. U.S. producers can now petition Commerce three times a year-- January, May, and September --to pull new derivative products into the tariff net as foreign exporters find new ways to evade the tariffs and the evasion battleground shifts.

The first inclusions clause window went live May 1. The result was this month’s expansion of more than 400 more products.

Going forward, our steel and aluminum industries won’t have to live with whack-a-mole tariff evaders any more. The recurring docket will close new derivative product loopholes fast.

The Commerce policy design is tough and fair. Only the value of the steel or aluminum content inside a covered derivative item pays the 50% duty. The non-metal content remains subject to the normal country-of-origin tariff schedule.

To further reinforce the steel and aluminum tariffs, U.S. Customs and Border Protection (CBP) will follow these rules: First, there is no minimum content threshold—if the product contains covered steel or aluminum, the derivative duty can apply.

Second, if the derivative good is made exclusively from U.S.-melted-and-poured steel or U.S.-smelted-and-cast aluminum, it’s exempt. That is how you target the subsidized input without punishing American metal.

CBP has also put out valuation rules—grounded in 19 U.S.C. §1401a—so importers can’t play cute with invoices or classification, and it has issued clear entry instructions keyed to the effective date. These rules target the subsidy where it lives and gives front-line CBP officers clean rules to enforce at the port.

The Trump tariffs are working! The U.S. International Trade Commission’s evaluation of the original 232 actions found material import reductions and measurable gains in domestic production in steel and aluminum—even before the derivative back door was fully shut. Extending coverage to the derivative products that have been acting as a backdoor should amplify those gains, especially in long-lead capital goods where buying decisions depend on predictable pricing.

Here's the Trump Tariff Axiom: A tariff that doesn’t follow the metal is a sieve. A tariff that does follow the metal changes boardroom and tariff evasion math from Düsseldorf to Dalian.

Peter Navarro is the White House Senior Counselor for Trade and Manufacturing.