US impose new trade tariffs; EU, Mexico pledge to retaliate

WASHINGTON: The Trump administration announced Thursday it will impose tariffs on steel and aluminum imports from Europe, Mexico and Canada after failing to win concessions from the American allies. Europe and Mexico pledged to retaliate quickly, exacerbating trans-Atlantic and North American trade tensions.
Commerce Secretary Wilbur Ross said the tariffs would be 25 percent on steel and 10 percent on aluminum, and go into effect on Friday, as the administration followed through on the penalties after earlier granting exemptions to buy time for negotiations. President Donald Trump had announced the tariffs in March, citing national security concerns.
The European Commission’s president, Jean-Claude Juncker, said Trump’s decision amounted to trade protectionism and that Europe would respond with countermeasures. “This is protectionism, pure and simple,” Juncker said. Mexico said it would penalize US imports including pork bellies, apples, grapes, cheeses and flat steel.
The tariffs directed at some of the US’s most ardent allies represented the latest move in Trump’s “America First” agenda that has roiled financial markets and raised the specter of a trade war involving the US, China and some of the globe’s most dominant economies.
The trade actions have opened the US to criticism that it’s burning bridges at a time when Trump is seeking to rid North Korea of nuclear weapons and help stabilize the Middle East.
“We are alienating all of our friends and partners at a time when we could really use their support,” said Wendy Cutler, a former US trade negotiator who is now vice president at the Asia Society Policy Institute.
Ross told reporters that talks with Canada and Mexico over revising the North American Free Trade Agreement were “taking longer than we had hoped.” Talks with Europe had “made some progress” but not enough for additional exemptions, he said in a conference call from Paris.
“We continue to be quite willing and indeed eager to have further discussions,” Ross said. He said he planned to travel to China on Friday for trade talks between the world’s two biggest economies.
European officials had braced for the tariffs and the EU has threatened to retaliate against US orange juice, peanut butter and other goods in return. In terms of the NAFTA talks, the tariffs could hinder the negotiations among the North American neighbors.
On NAFTA, Ross said there was “no longer a very precise date when they may be concluded and therefore (Canada and Mexico) were added into the list of those who will bear tariffs.”
Brazil, Argentina and Australia have agreed to limit steel shipments to the US in exchange for being spared the tariffs, the Commerce Department said. Tariffs will remain on imports from Japan.
Fears of a global trade war are already weighing on investor confidence and could hinder the global economic upturn. European officials argue that tit-for-tat tariffs will hurt growth on both sides of the Atlantic and Canada said before the announcement that it would respond in kind.
“Canada considers it frankly absurd that we would in any way be considered to be a national security threat to the United States,” Canadian Foreign Minister Chrystia Freeland said before the tariffs were announced. “The government is absolutely prepared to and will defend Canadian industries and Canadian jobs. We will respond appropriately.”
German Chancellor Angela Merkel stressed her opposition even before the US announcement, saying the looming tariffs were incompatible with World Trade Organization (WTO) rules. She said if there were no exemptions, “We will respond in an intelligent, decisive and joint way.”
German Foreign Minister Heiko Maas slammed US import duties, pledging a united European front against protectionist measures.
“Our answer to ‘America First’ can only be ‘Europe united’,” he said in a statement.
“Trade wars don’t have any winners.”
France’s finance minister, Bruno Le Maire, called the US tariffs “unjustified, unjustifiable and dangerous.”
“This will only lead to the victory of those who want less growth, those who don’t think we can develop our economies across the world. We think on the contrary that global trade must have rules in a context of multilateralism. We are ready to rebuild this multilateralism with our American friends,” he said.
The EU trade commissioner, Cecilia Malmstrom, said the EU “did everything to avoid this outcome.” Noting her discussions with US officials, she said.
She said the EU will launch a case at the WTO against the US move.
“The US has sought to use the threat of trade restrictions as leverage to obtain concessions from the EU. This is not the way we do business, and certainly not between longstanding partners, friends and allies,” she said.
“Now that we have clarity, the EU’s response will be proportionate and in accordance with WTO rules. We will now trigger a dispute settlement case at the WTO, since these US measures clearly go against agreed international rules.
“We will also impose rebalancing measures and take any necessary steps to protect the EU market from trade diversion caused by these US restrictions.”
“I have argued for the EU and the US to engage in a positive trans-Atlantic trade agenda, and for the EU to be fully, permanently and unconditionally exempted from these tariffs.”
Tariffs on steel and aluminum imports to the US can help local producers of the metals by making foreign products more expensive. But they can increase costs more broadly for US manufacturers that cannot source all their needs locally and have to import the materials. That hurts the companies and can lead to more expensive consumer prices, economists say.
“Unilateral responses and threats over trade war will solve nothing of the serious imbalances in world trade. Nothing,” French President Emmanuel Macron said Wednesday.
In a clear reference to Trump, Macron added: “These solutions might bring symbolic satisfaction in the short term. ... One can think about making voters happy by saying, ‘I have a victory, I’ll change the rules, you’ll see.’“
But Macron said those “who waged bilateral trade wars ... saw an increase in prices and an increase in unemployment.”
Britain said also it was deeply disappointed by the US decision.
“We are deeply disappointed that the US has decided to apply tariffs to steel and aluminum imports from the EU on national security grounds,” a government spokesman said.
“The UK and other European Union countries are close allies of the US and should be permanently and fully exempted from the American measures on steel and aluminum.”
Besides the US steel and aluminum tariffs, the US is also investigating possible limits on foreign cars in the name of national security.
Ross criticized the EU for its tough negotiating position. But German Economy Minister Peter Altmaier insisted the Europeans were ready to negotiate special trade arrangements, notably for liquefied natural gas and industrial goods, including cars.
World stocks jittered Thursday as fears returned of a global trade war sparked by US tariffs, just after global equities had started to recover from concerns over a fresh eurozone crisis.
The US market opened in the red just before Ross announced steep tariffs steel and aluminum imports from the European Union, Canada and Mexico.
For weeks the markets had been on a roller coaster ride after Trump announced the tariffs in March.
Since then, world leaders have made repeated appeals to safeguard the international trade system.
European stocks were also down in afternoon trading, even though they had appeared to be on the path to recovery in earlier action, with investor fears fading after the worst of the political storm in Italy.
The euro climbed as inflation in the eurozone leaped to the ECB’s target in May, fueled by a huge increase in oil prices as the US decided to pull out of a nuclear deal with Iran.
Asian equities earlier Thursday bounced back from the previous day’s mauling as fears of turmoil in Italy were soothed by conciliatory noises from the country’s two biggest populist parties.
“Fears over an Italian snap election have receded,” noted Joshua Mahony, market analyst at IG traders.
The news had provided relief to global markets beginning Wednesday after they were sent spinning by the crisis in Italy — the eurozone’s third biggest economy — which many feared could lead to fresh elections that could essentially become a referendum on euro membership.
Oil prices were down but holding up after they also rallied Wednesday in response to a report that said OPEC would likely lift output gradually, soothing concerns about a new supply glut.
Crude markets have been hammered since OPEC kingpin Saudi Arabia and Russia last week indicated they could lift a cap on production, which has supported prices for two years, as an oversupply crisis eases.
Investors are looking forward to the release Friday of key US jobs figures, which could provide some idea about the Federal Reserve’s plans for raising interest rates.
Payrolls firm ADP estimated US private sector job growth at 178,000 in May, down from 204,000 in April and slightly below analysts’ expectations.
However, while sentiment is positive, analysts warned that ongoing geopolitical issues and the unresolved China-US trade row continue to dog trading floors.
“We are going to be filled with tremendous uncertainty over the course of the summer,” David Ader, chief macro strategist at Informa Financial Intelligence, told Bloomberg Television.
“If you look at things like the various economic surprise indices out there they have been slowing down, but on the other hand you still have a Fed hike coming in June. I see a lot of uncertainty, which results in a lot of volatility.”

US impose new trade tariffs; EU, Mexico pledge to retaliate