18th Mar 2018

EU prepares retaliation on US steel tariffs

  • Symbolic brands targeted ahead of US mid-terms (Photo: Marcelo Campi)

The EU will unveil possible countermeasures against US president Donald Trump's proposed tariffs on steel and aluminium on Wednesday (7 March), amid the threat of a global trade war.

The European Commission is expected to politically endorse a set of measures that would be adjusted if Trump's tariff ideas materialise.

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Trade commissioner Cecilia Malmstroem will brief press on Wednesday on the EU's three-pronged response, which includes billions of euros of tariffs on US agriculture, steel, and industrial products.

"The idea is to be prepared as much as possible," said an EU official.

On Monday, the commission discussed with EU member states a list of products worth €2.8 billion, which, according to the EU's calculations is the amount of injury Trump's proposals could do to European economy.

Trump suggested a 25 percent tariff on US imports on steel and 10 percent on aluminium. The list will be finalised once the US measures are officially announced to "calibrate" the response.

It includes Harley-Davidson motorcycles, Kentucky bourbon and Levi's blue jeans according to commission president Jean-Claude Juncker, all of them symbolic American products manufactured in the home states of top Republican party leaders - Senate majority leader Mitch McConnell, from Kentucky, and House speaker Paul Ryan from Wisconsin.

With US November mid-term elections in sight, the aim for the EU is to maximise the impact of the European measures on the US both economically and politically.

EU officials say the planned measures are fully compatible with World Trade Organisation (WTO) rules, but the bloc also plans to challenge Trump's national security justification for the tariffs at the WTO.

"The burden of proof is now on the US," one EU official said.

The playbook used is similar to the one used in 2002 and 2003, when president George W. Bush imposed tariffs on steel imports to protect the US market from a surge of steel products mainly from China.

The EU, Japan, Korea, China, Brazil and others launched a complaint at the WTO, which ruled that Bush's tariffs were illegal and allowed sanctions against the US.

The US initially rejected the WTO ruling, but Bush backed down and removed the tariffs days before the EU would have triggered its retaliation.

The EU had earlier released a list of goods with planned new duties of € 2.2 billion, including Florida citrus and Harley Davidson motorbikes.

EU officials say that because Trump uses national security as justification, the bloc could impose new levies without waiting for the WTO dispute settlement to conclude.

"Back then US invoked safeguard measures which is the right of WTO members and we followed WTO procedure. This time it is different, there is nothing that justify these security arguments," the official added.

The EU is also looking into so-called safeguard measures as the potential US measures could divert steel flows from the US market to the European one, hurting EU businesses.

Swedish guest

Sweden's prime minister Stefan Loefven was due to meet Trump in the White House on Tuesday, the first European leader to do so after Trump's announcement tariff last week.

There has been coordination with the commission, a source said.

The Swedish premier is expected to reject in the strongest terms the planned US steel tariffs and explain to Trump that the national security reasoning does not make sense with the EU, which is a strategic ally.

The possible global trade war comes as the EU tries to reinforce multilateralism and free trade at a time when Trump is steering the US towards protectionism with his "America first" policy.

Since Trump's inauguration over a year ago, the EU has doubled its efforts to forge free trade agreements across the world, from Japan to Mexico.

Last year, Malmstroem said that efforts to reimpose trade barriers were "doomed to fail" after Trump took the US out of the transpacific TTP free trade deal and ended talks on an EU-US free-trade accord.

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