U.S. levies steel, aluminum tariffs on allies, risks trade war

31 May, 2018, 22:00 | Author: Natasha Holloway
  • Trump to hit EU, Canada and Mexico with steel and aluminium tariffs

Protecting the U.S. steel industry might help United States workers in the short-term, but if the USA is unable to make steel as cheaply as foreign rivals have been able to, then American manufacturers would also face higher costs.

Canada, Mexico and Europe had been exempted from import duties of 25 per cent on steel and 10 per cent on aluminum when they were first imposed in March, but those exemptions will expire as scheduled on Friday.

The assumption is that Trump is using tariffs to squeeze better trade terms out of China and the European Union, and to put the pressure on Canada and Mexico to reform the North American Free Trade Agreement (Nafta).

In a series of tweets shared at the time, Trump expanded on his initial plans to implement tariffs after an announcement he made in March.

Stocks in the U.S. fell as the administration ignored the pleas from business lobbying groups including the U.S. Chamber of Commerce to forgo tariffs.

Brazil, Argentina and Australia have agreed to limit steel shipments to the U.S.in exchange for being spared the tariffs, the Commerce Department said.

NAFTA negotiations are "taking longer than we had hoped".

Germany's foreign minister Heiko Mass called the tariff decision unlawful.

The White House announced on Thursday that it would be ending the temporary exemptions to the steel and aluminum tariffs for the European Union, Canada, and Mexico.

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Finally, talks to revise the North American Free Trade Agreement remain unresolved.

In particular, the continuing threat of restrictions on imports from a wide range of trade partners will provoke retaliation affecting US consumers, financial markets and activities of multinational companies. "We should build on our success in overhauling the nation's tax code with complementary trade policies that, rather than favoring one narrow industry, make all sectors of the USA economy more competitive".

"We will not accept this highly regrettable decision without reacting", he said.

More than 60 percent of USA auto imports - an industry that closely binds U.S. and Canadian manufacturing - come from G7 countries, as well as more than 50 percent of aluminium imports and almost 36 percent of steel. But they can increase costs more broadly for USA manufacturers that cannot source all their needs locally and have to import the materials. "The president's overwhelming objective is to reduce our trade deficit".

According to the Associated Press, French President Emmanuel Macron alluded to Trump's leadership style directly in slamming the pending tariffs in a Wednesday speech. That share prices of BMW, Daimler and Volkswagen.

Adding to the trade worries was a report that Trump aimed to push German carmakers out of the United States altogether, after launching a national security probe last week into vehicle and truck imports.

It is important to realise that when he means "barriers to trade" he means the ability of USA companies to steal European Union citizens data and flog it to whoever they like. Accordingly, despite the historical precedent for unilateral, protectionist trade measures to result in a weaker US Dollar, market participants are seemingly unmoved by the latest developments.

The three close US allies had been part of a small group of foreign governments that received temporary exemptions from the tariffs, until trade deals could be signed.

The EU has threatened to retaliate with tariffs on Harley Davidson motorcycles and bourbon, measures aimed at the political bases of Republican legislators who they wanted to stand up to Trump. "We will respond appropriately", she said. The EU's retaliatory measures are set to come into force on June 20, and will hit €2.8 billion worth of products with tariffs of 25 per cent.

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