Tuesday

14th Aug 2018

Trump starts countdown to EU trade war

  • US allies said Trump 'security' justification hard to understand (Photo: whitehouse.gov)

US leader Donald Trump has imposed a 15-day countdown to an EU trade war set to hit steel, aluminium, cars, food, and other products.

"Today I'm defending America's national security by placing tariffs on foreign imports of steel and aluminium," he said in the White House on Thursday (8 March) surrounded by US steel workers.

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  • European steel makers fear overcapacity as China diverts products from US to EU (Photo: Tata Steel Europe)

Foreign "dumping" of cheap metals was responsible for "shuttering [US] plants and mills … laying off millions of workers and the decimation of entire communities," he said.

"We want to build our ships, build our planes, our military equipment with aluminium and steel from our country," he added.

He exempted Canada and Mexico from the tariffs, which are to come into effect on 23 March, due to ongoing talks on a North American trade accord.

He also said he would show "great flexibility and cooperation for those who were truly friends of ours both in trade and security terms," but he did not exempt the EU.

The EU's first response came from trade commissioner Cecilia Malmstroem.

"The EU is a close ally of the US and we continue to be of the view that the EU should be excluded from these measures," she said on Twitter.

She said she would "seek more clarity" when she met Trump's trade chief, Robert Lighthizer, in Brussels on Saturday.

The European Commission had earlier said it might impose tariffs on US motorbikes, jeans, bourbon, tobacco, oranges, and peanut butter in response, threatening a trade war that could escalate to also hit German exports of cars to America.

The EU's jobs and growth commissioner, Jyrki Katainen, urged caution on Friday.

"We must avoid the temptation of unilateral moves," he said at an event in Brussels organised by AmCham, the US chamber of commerce.

"There is a risk of breaking up the rules-based [global trade] system … It's time to be responsible and to keep long-term interests in mind," he added.

"The EU is not the problem in this case … we trade fairly," he said

French economy minister Bruno Le Maire said on Thursday there would be "only losers" on both sides in a trade war.

But French foreign minister Jean-Yves Le Drian called for "a strong response." "Europe must show its sovereignty, its power," he said.

EU industry

EU steel and aluminium producers echoed the politicians.

"The US measure baselessly includes EU producers, who will suffer significantly from the loss of one of its major export markets," Axel Eggert, the head of the European steelmakers lobby, Eurofer, said.

"The loss of exports to the US, combined with an expected massive import surge in the EU, could cost tens of thousands of jobs", he added.

Gerd Goetz, the head European Aluminium, said the US measures "could have severe economic consequences for SME's [small and medium-sized enterprises] in countries such as Germany, Italy, France, Spain, Sweden and in central and east European countries."

"If we do not act immediately, Europe is at risk of losing a strategic industry," he said.

With the UK angling for a free-trade deal with the US after it leaves the EU next year, Gareth Stace, the director of UK Steel, also despaired.

"Imposing such measures on US allies in the name of national security is difficult to comprehend," he said.

Wider outcry

Australia, China, Japan, and South Korea joined the EU in criticising Trump's plan, with South Korea threatening to take action via the World Trade Organisation.

Canada and Mexico welcomed their exemptions, but said they would continue to oppose Trump's attack on free trade.

A handful of US politicians from Trump's Republican Party also rallied against him.

Jeff Flake, a Republican senator, said he would introduce an emergency bill to nullify Trump's order, adding: "I urge my colleagues to pass it before this exercise in protectionism inflicts any more damage on the economy".

US House speaker Paul Ryan said he feared "unintended consequences" on US firms that needed cheap metals to make their products.

"The US will become an island of high steel prices that will result in our customers simply sourcing our products from our overseas competitors and importing them into the United States," America's Precision Metalforming and National Tooling and Machining associations said.

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