To understand the current transatlantic trade crisis, one must understand the “logic of the loophole.” The US expansion of tariffs to “derivative” products was not a random move, but a logical, if aggressive, evolution designed to close what it perceived as a major loophole in its original steel protection policy.
The initial tariffs targeted only primary metals. The perceived loophole was that a country like China could simply ship its cheap steel to a third country (e.g., in the EU), where it would be turned into a finished product like a crane. That crane could then be exported to the US, effectively circumventing the steel tariff.
The “derivative” products list is the US solution to this problem. It attempts to follow the steel through the supply chain and tax it at the final point of entry. By targeting the finished good based on its metal content, the policy aims to make it impossible to “launder” cheap steel through manufacturing in an allied nation.
While logical from a protectionist standpoint, this approach has devastating consequences for allies caught in the middle. The German motorcycle maker, for instance, is not trying to circumvent anything, but it is being punished by a system designed to catch bad actors.
This “logic of the loophole” explains why the policy is so broad and complex. It has to be, in order to trace the steel through intricate global supply chains. But in trying to create a watertight system, the US has created a policy that is drowning its friends.