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How Trump's tariffs would work

WASHINGTON (AP)  Ever a deal-maker, President Donald Trump is making a bold gamble by inviting the countries of the world to negotiate their way out of heavy new taxes on steel and aluminum imported to the United States.

When Trump announced Thursday that he was slapping tariffs of 25 percent on imported steel and 10 percent on aluminum, he temporarily exempted big steel producers Canada and Mexico  provided they agree to renegotiate a North American trade deal to his satisfaction.

Other countries, too, could be spared, the president said, if they can convince the administration that their steel and aluminum exports don't threaten American industry.

By offering countries a way to escape the tariffs, Trump might have eased the risk of a destructive trade war. At least for now. 

But "it introduces a lot of uncertainty," says Wendy Cutler, a former U.S. trade official now at the Asia Society Policy Institute. "You're going to see countries camping out in Washington and trying to figure out who they need to talk to."

Here's a closer look at what Trump's action does, how it would work and whether it's likely to succeed.

Why did Trump impose taxes on imported steel and Aluminum?

Trump dusted off an obscure section of American trade law: It says the president can impose tariffs on imports that pose a threat to U.S. security. The president has "huge leeway because it's national security," says Amanda DeBusk, a trade lawyer and partner at Hughes Hubbard & Reed LLP. "He can impose tariffs as high or low as he wants."

The administration argued that healthy steel and aluminum industries are vital to the national defense. The tariffs, to take effect in 15 days, are designed to reinvigorate those industries.

Why do the steel and aluminum makers need help?

U.S. steel and aluminum producers  and their counterparts around the world  have been hammered by overproduction by China. Beijing's explosive output has depressed global metals prices and forced U.S. domestic companies to reduce production and cut jobs.

"The American aluminum and steel industry has been ravaged by aggressive foreign trade practices," Trump declared at a White House ceremony, surrounded by steel and aluminum workers holding white hard hats. "It's really an assault on our country."

So if China is the problem, will it be hardest hit by the tariffs?

Nope. Chinese metal imports to the United States are already heavily restricted. China is just America's 11th-biggest supplier of foreign steel and the fourth-biggest supplier of aluminum. In fact, a staunch U.S. ally, Canada, is by far the biggest foreign supplier of both metals to the United States and therefore stood to be hurt the most by the tariffs.

The administration has come under intense pressure to exempt Canada. Critics called it absurd to claim that Canadian imports threatened U.S. national security. So Trump agreed to indefinitely exempt Canada and Mexico, another ally and metals supplier.

But there's a catch?

Yes. Canada and Mexico could lose the exemption  and be slapped with the tariffs  if negotiations to overhaul the North American Free Trade Agreement collapse. Trump campaigned against NAFTA as a job-killing disaster that he said encouraged American companies to move factories to Mexico to exploit cheap labor. Renegotiations began last summer. But they've stalled over tough U.S. demands, including the administration's insistence that more auto production be shifted to America. 

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