Trump action heightens trade tensions
U.S. allies warn of retaliation after tariffs on 2 metals
The Trump administration’s announcement that its once-delayed tariffs would take effect starting Friday was met with swift condemnation and promises of dollar-for-dollar retaliation as well as a multilateral challenge at the World Trade Organization.
Canadian leaders reacted particularly angrily to the tariffs of 25 percent on steel and 10 percent on aluminum. Trump had justified the import levies on the grounds of national security — a line of reasoning that Canadian officials called absurd, illogical and illegal.
Canada, the largest exporter of steel and aluminum to the United States, said it would apply counter-tariffs of 25 percent and 10 percent on $16.6 billion worth of American metals, farm goods and other products, to take effect July 1.
“That Canada could be a national security threat to the U.S. is inconceivable,” said Canadian Prime Minister Justin Trudeau, noting the many Canadians who have died alongside U.S. soldiers in joint military operations over the years. “These tariffs are an affront to the longstanding security partnership between Canada and the United States.”
Mexico announced immediate retaliatory tariffs on U.S. products including pork bellies, apples, grapes, blueberries and flat steel.
EU leaders already had drawn up a list of American imports worth several billions of dollars that would be subject to tariffs, including blue jeans, Kentucky bourbon and Harley-Davidson motorcycles — goods aimed at applying maximum political pressure as they are produced in home states of top lawmakers.
“This is protectionism, pure and simple,” said Jean-Claude Juncker, president of the EU Commission, which represents the 28 member states in the union. He said the U.S. “now leaves us with no choice” but to impose duties on American imports, although he did not specify the amount or timing of the retaliation.
European officials on Thursday met with U.S. Commerce Secretary Wilbur Ross in Paris in a last-ditch effort to dissuade the U.S. from going through with the tariffs, arguing among other things that the administration was directing its aim at the wrong target. They said the source of the problem of excess global steel production is China, not Europe.
Trump first announced plans to tax imported steel and aluminum from all countries in March, but delayed applying the tariffs on the EU, Canada, Mexico and a handful of other countries as the administration sought voluntary quotas or other trade concessions from them. Ross indicated that negotiations could continue even after the tariffs are imposed, but EU officials insisted that the threat of metal tariffs be removed before broader trade discussions could take place.
The EU is the United States’ largest trading partner, with exchange of goods and services exceeding $1 trillion. Steel and aluminum make up a tiny fraction of the overall trade: U.S. steel imports from all countries totaled about $29 billion in 2016 — a fifth of that from the EU.
What worries analysts now is how Trump might react to the trade retaliation. In a separate trade battle with China, Trump initially threatened tariffs on $50 billion of Chinese goods for intellectual property theft, but after Beijing vowed it would match the tariffs, the president proposed tripling the duties on $150 billion of Chinese imports.
“If the U.S. ups the ante and this doesn’t remain just a steel issue, particularly with Canada, Mexico, and the EU, then that would be a signal to me that we are spinning out of control,” said Douglas Irwin, an economics professor and trade historian at Dartmouth College. He added: “I can understand, in some sense, the administration starting a trade war with China, but it is enormously damaging and counterproductive to start a trade war with Canada, the EU, and Mexico.”
Congressional Republicans blasted Trump’s move to levy steel and aluminum imports, predicting it would hurt domestic companies and lead to higher prices for American consumers.
“This is dumb,” said Nebraska Sen. Ben Sasse.
House Speaker Paul Ryan, R-Wis., said he disagreed with the decision. “Instead of addressing the real problems in the international trade of these products, today’s action targets America’s allies when we should be working with them,” he said.
Some U.S. aluminum producers and groups supporting domestic steel manufacturers and Trump’s “America first” agenda applauded the action.
But the steel and aluminum tariffs are likely to complicate, if not hamper, ongoing negotiations with Canada and Mexico to revamp the North American Free Trade Agreement, a major economic goal for the administration. Trump has made it no secret that the threat of steel and aluminum tariffs was intended as a lever to win concessions from Canada and Mexico.