EU braces for trade war as US announces steel tariffs

Written by Martin Banks on 9 March 2018 in Opinion
Opinion

US President Donald Trump has sparked fury after he unveiled controversial plans to impose tariffs of 25 per cent on steel imports and 10 per cent on aluminium, with provisional exceptions for Canada and Mexico.

Donald Trump | Photo credit: Press Association


Trump campaigned on saving US steel and aluminium jobs, which have been lost to cheap imports.

Announcing the clampdown, he said EU trade rules make it “impossible” for US firms to do business, adding, “Steel is steel. Without steel you don’t have a country.”

White House trade adviser Peter Navarro defended the move, saying, “Look, this is pretty simple in this case. We’ve got an aluminium and steel industry. The President, quite clearly and correctly, believes we can’t have a country without those two industries. Fact of the matter is, both of them are on life support - the aluminium industry in particular.”


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Trump’s top economic advisor Gary Cohn, who opposes tariffs, resigned and the move has led to warnings that the tariffs could trigger a trade war with the European Union, China and other countries unless they are also exempted.

The EU is a major exporter of steel to the US, along with Canada and South Korea.

On Friday, the European Commission said it “stands ready to react proportionately and fully in line with the World Trade Organisation (WTO) rules.”

The EU has threatened to retaliate against roughly €2.8bn in US exports if its member countries are hit with the duties.

A battle at the WTO is also a possibility, as the EU and a number of other US trading partners are expected to challenge the action before the international trade body if they are not given exemptions.

President Trump’s tariff plan, which will go into effect in 15 days, is based on a rarely used trade law that allows the President to impose restrictions on imports to protect national security interests.

The Commerce Department found in a pair of reports that cheap imports of steel and aluminium, which most nations blame on Chinese overproduction, pose a threat to national security by hurting production capacity in the two domestic sectors.

But members of Parliament’s international trade committee said that imposing restrictions on EU steel and aluminium exports to the US is unacceptable and calls for a firm response.

On Friday, Cecilia Malmström, European trade Commissioner, said the move by the United States would “put thousands of European jobs in jeopardy, and has to be met by a firm and proportionate response.” 

If the American tariffs are put in place, Malmström said, the EU could take three steps: take the case to the  WTO; add safeguards to protect the EU against steel diverted from the United States or impose tariffs on a series of American-made goods.

A provisional list of items being targeted ranges from steel to T-shirts, also including bed linen, chewing tobacco, cranberries and orange juice, among other products. The overall size of the business affected is relatively small in comparison with the nearly €250bn of goods the EU bought from the United States in 2016.

Further comment on Friday came from European Council President Donald Tusk who said, “There is a risk of a serious trade dispute between the United States and the rest of the world, including the EU.

“President Trump has recently said, and I quote, ‘Trade wars are good and easy to win’. But the truth is quite the opposite. Trade wars are bad and easy to lose,” he said.

At a press conference in Frankfurt, Mario Draghi, President of the European Central Bank ECB, called unilateral tariff decisions “dangerous”.

He said, “What strikes me is whatever convictions you have about trade, we are convinced that disputes should be discussed and resolved in a multilateral framework.”

 

About the author

Martin Banks is a senior reporter for the Parliament Magazine

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