24 June 2018

U.S. Tariffs Prompt Anger

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The U.S. will impose tariffs on steel and aluminum imports from Canada, Mexico and the European Union starting on Friday, the Trump administration said, raising the specter of trade war with some of Washington’s closest allies, who said they would retaliate.

Canadian Prime Minister Justin Trudeau on Thursday said Ottawa will impose billions of dollars of tariffs on steel, aluminum and a wide range of other U.S. goods, including some food and agricultural products. Canada said it would hold consultations for two weeks before imposing the tariffs on July 1, which would remain until the U.S. levies are removed.

Mr. Trudeau said the fallout from its moves would be “more significant” than it realizes.

The EU said it is also planning to hit back with billions of dollars of levies on U.S. exports which could go into effect staring June 20 and launch a case against American measures at the World Trade Organization on Friday.

“This is protectionism, pure and simple,” the EU’s top executive, European Commission President Jean-Claude Juncker, said Thursday. “We will defend the Union’s interests, in full compliance with international trade law.”

Mexico’s Economy Ministry said it would target several U.S. goods in response, including some steel and pipe products, lamps, berries, grapes, apples, cold cuts, pork chops and various cheese products “up to an amount comparable to the level of damage” linked to the U.S. tariffs.

The tariffs make good on Mr. Trump’s threats and show the administration is maximizing pressure to win concessions from allies. Commerce Secretary Wilbur Ross said that starting on Friday, the U.S. will impose a 25% levy on steel and 10% on aluminum from Canada, Mexico and the European Union, the same tariffs most other nations face in the U.S.

Since Mr. Trump announced unilateral, global steel and aluminum tariffs in March, Canada, Mexico and the European Union, which includes the U.K., had been offered temporary exemptions to the duties. All three economies received an extension a month ago. But on Thursday Mr. Ross told reporters the exemptions won’t be renewed.

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“We continue to be quite willing and indeed eager to have further discussions with all of those parties,” Mr. Ross said in a call from Paris.

Mr. Ross had worked with EU leaders in a failed effort to strike an economic deal that would allow the bloc’s member states—including most members of the North Atlantic Treaty Organization—to avoid tariffs.

The temporary exemptions were also issued while U.S. officials seek to negotiate a new version of the North American Free Trade Agreement, or Nafta, with Canada and Mexico.

“Those talks have been taking longer than we had hoped,” Mr. Ross said.

Mr. Trudeau also said he had offered to travel to Washington to meet with Mr. Trump and finalize a deal on Nafta. He said he was told Canada would need to agree to a sunset clause as a precondition to reaching a deal, a term Mr. Trudeau said he wouldn’t accept.

The White House said Argentina, Australia and Brazil won’t be subjected to the tariffs. South Korea had previously finalized an exemption that includes a quota on steel.

Meanwhile, the Trump administration also is negotiating a high-stakes trade conflict with China, seen as an economic competitor.

The U.S. administration is studying whether tariffs should be imposed on imported cars and auto parts under the same law that gives Mr. Trump wide authority to erect trade barriers under the banner of national security.

Mr. Trump, who has defended the use of tariffs to protect U.S. workers, is betting that raising pressure on the EU and partners in Nafta will yield agreements that help U.S. domestic industries.

The White House said the “steel and aluminum tariffs have already had major, positive effects on steel and aluminum workers and jobs and will continue to do so long into the future,” the White House said on Thursday.

Yet the policy risks higher prices on imports, painful retaliation against U.S. exports and the possibility of a longer-term hit to relations with allies if the Trump administration alienates politicians in allied democracies.

Canada said it would impose a 25% tariff on steel imports from the U.S. and a 10% tariff on aluminum and the other products. The total value of the imports on the list is 16.6 billion Canadian dollars ($12.9 billion), according to the Canadian government, which says that amount represents the value in 2017 of Canadian exports that will be affected by the new U.S. levies.

Canada Foreign Minister Chrystia Freeland called the tariffs the strongest retaliatory action Canada has taken since World War II. “This is a very strong Canadian reaction in response to a very bad U.S. decision,” Ms. Freeland said.

The EU has prepared a list of U.S. exports worth €6.4 billion ($7.5 billion) that could be slapped with levies, up to €2.8 billion of which could go into effect staring June 20.

Republican lawmakers were quick to voice their disapproval of the Trump administration initiative.

“This is dumb,” said Sen. Ben Sasse, a Nebraska Republican. “Europe, Canada, and Mexico are not China, and you don’t treat allies the same way you treat opponents.”

Sen. Orrin Hatch, chairman of the Senate Finance Committee, said: “Tariffs on steel and aluminum imports are a tax hike on Americans and will have damaging consequences for consumers, manufacturers and workers. I will continue to push the administration to change course.”

U.S. allies were also unsparing.

A spokesperson for the U.K. government, said, “We are deeply disappointed that the U.S. has decided to apply tariffs to steel and aluminum imports from the EU on national security grounds.”

Much of the U.S. steel industry and the United Steelworkers union have opposed steel tariffs on Canada, so the Trump administration will face strong lobbying to cancel the duties on steel and aluminum from affecting steel produced in North America.

The countries hit by tariffs include some of closest U.S. allies and trading partners, and biggest suppliers of metals.

Canada accounts for about half of the raw aluminum imported by the U.S. and about 21% of the finished steel imports by the U.S. It’s a major provider of steel plate and hot-rolled coil steel used widely throughout manufacturing.

Mexico supplies 9% of finished steel imports, but also provides 11% of semi-finished steel. These are generally big slabs of steel that U.S. mills buy to make finished products like sheet steel and pipe.

EU countries provide 17% of the steel imported by the U.S., according to Jefferies. The EU is a major supplier of stainless steel, high-value steel used by the automotive industry.

Canadian officials made a last-ditch effort this week to get the exemption extended: Ms. Freeland visited U.S. Trade Representative Robert Lighthizer to plead Ottawa’s case, and the government in Ottawa issued a new policy late Wednesday to prevent the dumping of cheap foreign steel into North America.

Mr. Trudeau said it was “absurd” to believe Canadian steel and aluminum posed a security threat, given that those products are used to help build U.S. fighter jets and armored vehicles. He added he Mr. Trump “how difficult the [tariffs] was going to be in terms of a turning point in U.S.-Canada relations.”

Mr. Ross, who is leading the reviews of steel, aluminum and auto-industry imports, said countries aren’t being singled out as national-security threats but instead evaluated through a broader economic lens.

“The question is what is the overall impact of the overall global supply situation in steel and aluminum, relatively to those industries, relative to national defense, and relative to the national economy,” he said.

The Trump administration says the national-security justification for the tariffs means they are in accordance with U.S. law and a special security exception at the WTO. Mr. Ross said the administration, led by Agriculture Secretary Sonny Perdue, are looking at ways to support farmers hurt by any retaliatory duties or quotas.

Mr. Trump has warned he may respond to retaliatory tariffs with barriers against European cars.

“I think it’s important for countries to retaliate,” said Luis de la Calle, a former Mexican official who was part of the original Nafta negotiating team. “If we don’t do it now, it’s only going to get worse with possible car tariffs.”

Click here for the original article from The Wall Street Journal.

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