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Trade

EU prepares duties against leading US companies as IMF pushes back against Trump’s trade war threat

Bourbon, Harley-Davidson and Levi’s jeans are among the American exports that could be hit with EU tariffs; meanwhile the International Monetary Fund is warning of grave consequences

PUBLISHED : Saturday, 03 March, 2018, 2:35am
UPDATED : Saturday, 03 March, 2018, 5:03am

The EU is preparing retaliatory measures against some leading US brands after US President Donald Trump threatened a global trade war play placing huge tariffs on steel and aluminium, European Commission chief Jean-Claude Juncker said Friday.

“We will not sit idly when European industry and jobs are threatened. #EU preparing import duties for US products including Harley-Davidson, Bourbon and Levi’s jeans,” his spokeswoman quoted him on Twitter as telling journalists in Germany.

Meanwhile, European Commission Vice-President  Jyrki Katainen has urged Trump to back off from signing the tariffs, saying there is still a small window to avoid a trade war, and the International Monetary Fund has warned of grave consequences.

The remarks came the same day that Trump boasted that “trade wars are good, and easy to win.”

None of this is reasonable … I can’t see how this isn’t part of [trade] war-like behaviour
European Commission President Jean-Claude Juncker

Earlier on Friday, Juncker commented: “None of this is reasonable, but reason is a sentiment that’s very unevenly distributed in the world.”

Asked if a trade war is brewing, he said: “I can’t see how this isn’t part of war-like behaviour.”

Katainen, meanwhile, said that the EU would “form a coalition of like-minded countries and potentially take the US to the WTO court together,” Katainen said in reference to the World Trade Organization tribunal in Geneva.

However, the former Finnish prime minister said, “there is a little window of opportunity still open” and that “the president of the US has not yet signed the proposals. So we do hope that he will reconsider his aims.”

“We are very close to a fast spreading trade war and in this kind of war there are only victims, not winners, said Katainen, who handles trade policy for the EU with trade commissioner Cecilia Malmstrom.

Trade war signalled by Trump has to be stopped at all costs

He said he understood that the US was seeking to take a stand against China, which has flooded the globe with cheap steel. 

“I understand the frustration but the medicine the US administration is willing to use is not right,” he said.

Global trade war... means in concrete terms unemployment, less economic growth, and worse relations
European Commission Vice-President Jyrki Katainen

He added that a “global trade war... means in concrete terms unemployment, less economic growth, and worse relations between trading partners.

“At a time when we have just come out of the most severe economic crisis in decades, nobody should do anything in order to harm the stability we have achieved.”

Also opposing Trump’s of 25 per cent tariff on imported steel and 10 per cent tariff on imported aluminium was the International Monetary Fund (IMF), which warned that they will harm the US and global economies.

“The import restrictions announced by the US President are likely to cause damage not only outside the US, but also to the US economy itself,” IMF spokesman Gerry Rice said in a statement.

He said the move raises fears other countries could use national security rationale “to justify broad-based import restrictions,” and urged countries to work to resolve trade disagreements without such extremes.

Markets tumbled in Asia, where China expressed “grave concern,” while in the United States, the S&P 500 dropped as much as 1.1 per cent before paring its decline.

Trump’s trade tariffs put Xi’s economic envoy in the shade

The official response in China, the world’s largest steel producer and the main target of the tariffs, was muted. Foreign Ministry spokeswoman Hua Chunying said in Beijing Friday that China urges the US to follow trade rules.

But industry insiders were less restrained.

The US measures “overturn the international trade order,” Wen Xianjun, vice chairman of the China Nonferrous Metals Industry Association, said in a statement.

Other countries, including China, will take relevant retaliatory measures
Wen Xianjun, vice chairman of the China Nonferrous Metals Industry Association

“Other countries, including China, will take relevant retaliatory measures.”

Li Xinchuang, vice chairman of the China Iron and Steel Association, called the move “stupid.”

China has already launched a probe into US imports of sorghum, and is studying whether to restrict shipments of US soybeans -- targets that could hurt Trump’s support in some farming states. 

While China accounts for just a fraction of US imports of the metals, it’s accused of flooding the global market and dragging down prices.

Japan also expressed concern, and Japan’s trade minister, Hiroshige Seko, expressed bafflement at Trump’s “national security” reasoning

“Steel and aluminum imports from Japan, which is an ally, do not affect US national security at all,” he told reporters on Friday. “I would like to convey that to the U.S. when I have an opportunity.”

In a letter to Trump, Kosei Shindo, chairman of the Japan Iron and Steel Federation, called the tariff “a market-distorting measure which would cause serious harmful effects not only on steel exports from Japan but also on steel trade worldwide.”

Shindo said Trump’s move risked prompting other countries to use the national security rationale to impose their own tariffs.

“It is likely that US actions ... will create a negative chain reaction affecting not only steel but also other products considered to have national security implications, with other countries taking similar actions under similar pretenses,” he said in the letter which was posted on the federation website.

Concerns have also been raised within the US, as Trump’s tariffs are likely to raise steel and aluminium prices there.

Kooky 18th century protectionism will jack up prices on American families
US Senator Ben Sasse

That’s good for US manufacturers - but it’s bad for companies that use the metals, and it prompted red flags from industries ranging from tool and dye makers to beer distributors to manufacturers of air conditioners.

The American International Automobile Dealers Association warned it would drive prices up “substantially.”

And Senator Ben Sasse, a Nebraska Republican, said: “Make no mistake: If the president goes through with this, it will kill American jobs – that’s what every trade war ultimately does.”

Early Friday, Trump took to Twitter to defend himself: “When a country (USA) is losing many billions of dollars on trade with virtually every country it does business with, trade wars are good, and easy to win.

“Example, when we are down $100 billion with a certain country and they get cute, don’t trade anymore-we win big. It’s easy!”

He later tweeted: “Our steel industry is in bad shape. IF YOU DON’T HAVE STEEL, YOU DON’T HAVE A COUNTRY!”

Sasse echoed a sentiment of many US lawmakers when he issued a statement in response: “Kooky 18th century protectionism will jack up prices on American families.”

What benefits one industry can hurt another. What saves one job can jeopardise another
Wendy Cutler, former US trade official

Trump’s announcement came only after an intense internal White House debate. It brought harsh criticism from some Republicans and roiled financial markets with concerns about economic ramifications.

Trump has long railed against what he deems unfair trade practices by China and others.

This week, he summoned steel and aluminium executives to the White House as he declared the penalties that, he said, would remain for “a long period of time.” It was not immediately clear if certain trading partners would be exempt.

“This is going to have fallout on our downstream suppliers, particularly in the automotive, machinery and aircraft sectors,” said Wendy Cutler, a former US trade official who is now vice-president of the Asia Society Policy Institute.

“What benefits one industry can hurt another. What saves one job can jeopardise another.”

Steel-consuming companies said steel tariffs imposed in 2002 by President George W Bush ended up wiping out 200,000 US jobs.

The decision had been strenuously debated within the White House, with top officials such as economic adviser Gary Cohn and Defence Secretary Jim Mattis raising concerns.

The penalties were pushed by Commerce Secretary Wilbur Ross and White House trade adviser Peter Navarro, an economist who has favoured taking aggressive action.

Mattis, in a memo to Commerce, said US military requirements for steel and aluminium represent about 3 per cent of US production and that the department was “concerned about the negative impact on our key allies” of any tariffs. 

He added that targeted tariffs would be preferable to global quotas or tariffs.

Top US senator takes swipe at China but urges caution on tariffs

Plans for Trump to make an announcement were thrown into doubt for a time because of the internal divisions.

The actual event caught some top White House officials off guard and left aides scrambling for details. Key Senate offices also did not receive advance notice.

White House press secretary Sarah Huckabee Sanders said the decision “shouldn’t come as a surprise to anyone,” noting that the president had been talking about it “for decades.” 

On Friday, she told reporters that Trump wasn’t concerned about the day’s market decline, adding that the “president is still focused on long term economic fundamentals.”

Sasse wasn’t the only Republican in Congress who was plainly upset

US markets fall hard as Trump hits China with steel, aluminium tariffs

Senator Pat Roberts (Republican, Kansas), chairman of the Senate Agriculture Committee, said, “Every time you do this, you get a retaliation and agriculture is the No. 1 target.”

House Speaker Paul Ryan (Republican, Wisconsin), said through a spokesman he hoped Trump would “consider the unintended consequences of this idea and look at other approaches before moving forward.”

Trump met with more than a dozen executives, including representatives from US Steel Corp, Arcelor Mittal, Nucor, JW Aluminum and Century Aluminum. The industry leaders urged Trump to act, saying they had been unfairly hurt by a glut of imports.

“We are not protectionist. We want a level playing field,” said Dave Burritt, president and chief executive officer at US Steel.