US President Donald Trump slapped steep trade tariffs on foreign steel and aluminium yesterday (8 March), drawing sharp protests from allies at home and abroad as the contentious move raised the spectre of a global trade war.
Signaling a sharp departure from a decades-long US-led drive for more open and less regulated trade, Trump declared that America had been “ravaged by aggressive foreign trade practices.”
“It’s really an assault on our country,” he said, in announcing the tariffs of 25% on imported steel and 10% on aluminium.
— CNN (@CNN) March 8, 2018
Trump said the tariffs — which will come into effect after 15 days — will not initially apply to Canada and Mexico, and that close partners on security and trade could negotiate exemptions.
“Many of the countries that treat us the worst on trade and on the military are our allies, as they call them,” he complained.
The tariffs, worth billions of dollars, sparked immediate protests from top trading partners the European Union and Brazil, with retaliatory action expected from China and other economic powers.
Leaning on a little-used and decades old national security clause in US trade law, Trump said he was fulfilling a campaign promise.
President Trump is protecting American national security from the effects of unfair trade practices by protecting our steel and aluminum industries. Read more: https://t.co/cJpAq6soNd
— The White House (@WhiteHouse) March 8, 2018
‘Bring your plants to the US’
“I’ve been talking about this a long time, a lot longer than my political career,” he said. “We’ve been treated very badly by our past administrations, by presidents that represented us that didn’t know what they were doing.”
Describing the dumping of steel and aluminium in the US market as “an assault on our country,” Trump said in a White House announcement that the best outcome would for companies to move their mills and smelters to the United States. He insisted that domestic metals production was vital to national security.
“If you don’t want to pay tax, bring your plant to the USA,” added Trump, flanked by steel and aluminium workers.
“Presidential Proclamation on Adjusting Imports of Steel into the United States”
— Donald J. Trump (@realDonaldTrump) March 8, 2018
The mercurial 45th president compared his action to those of predecessors George Washington, Abraham Lincoln and William McKinley.
Plans for the tariffs, set to start in 15 days, have stirred opposition from business leaders and prominent members of Trump’s own Republican Party, who fear the duties could spark retaliation from other countries and hurt the U.S. economy.
Within minutes of the announcement, US Republican Senator Jeff Flake, a Trump critic, said he would introduce a bill to nullify the tariffs. But that would likely require Congress to muster an extremely difficult two-thirds majority to override a Trump veto.
Some Democrats praised the move, including Senator Joe Manchin of West Virginia, who said it was “past time to defend our interests, our security and our workers in the global economy and that is exactly what the president is proposing with these tariffs.”
President Trump: “Your father … is looking down, he’s very proud of you right now.”
Local steel worker union president: “Oh, he’s still alive.”
Trump: “Oh, he is? Then he’s even more proud of you.” pic.twitter.com/rLKIlMDzkr
— NBC News (@NBCNews) March 8, 2018
Canada, America’s neighbor to the north, was its single-largest source of steel last year, followed by Brazil, South Korea, Russia, Mexico, Japan and Germany.
Regarding alumina and aluminium, Canada was also by far the largest supplier followed by China, Russia and the United Arab Emirates.
Trump had indicated he would be flexible toward “real friends,” and during the signing confirmed Canada and Mexico would be permanently exempted if the ongoing renegotiation of the North American Free Trade Agreement is successful.
The US leader had also added Australia to a list of likely carve-outs, as a “great country” and “long term partner.”
But he singled out Germany for criticism, reviving a longstanding gripe that European NATO allies do not pay their fair share.
“We have some friends and some enemies where we have been tremendously taken advantage of over the years on trade and on military,” he said.
The EU’s top trade official Cecilia Malmström insisted the entire bloc “should be excluded” from the tariffs as a “close ally,” vowing to “seek more clarity” from Washington. Meanwhile, Council President Donald Tusk said EU leaders would hold emergency talks on the issue on the occasion of their 22-23 March summit.
Britain, meanwhile, said it would “work with EU partners to consider the scope for exemptions outlined today,” saying “tariffs are not the right way” to tackle the problem of global over-capacity in steel.
Major producer Brazil immediately vowed to take “all necessary steps” in order to “protect its rights and interests” in response to the US move.
Major Asian nations react
China, which produces half the world’s steel, will assess any damage caused by the US move and “firmly defend its legitimate rights and interests,” the country’s Ministry of Commerce said.
The tariffs would “seriously impact the normal order of international trade,” the ministry said.
Trade tensions between China and United States have risen since Trump took office. China accounts for only a small fraction of US steel imports, but its massive industrial expansion has helped create a global glut of steel that has driven down prices.
Reminder that Trump used Chinese steel rather than US steel on his building projects. https://t.co/Kg0P48UvlM
— Roland Scahill (@rolandscahill) March 8, 2018
China’s steel and metals associations urged the government to retaliate against the United States, citing imports ranging from stainless steel to coal, agricultural products and electronics.
China steel industry association urges Chinese government to retaliate against Trump tariffs with measures against U.S. stainless steel, galvanized sheeting, piping, coal, agricultural goods and electronic products. https://t.co/VIz6Sqj7On
— Chris Buckley 储百亮 (@ChuBailiang) March 9, 2018
It was the most explicit threat yet from the country in an escalating trade spat.
The dispute has fuelled concerns that soybeans, the United States’ most valuable export to the world’s second largest economy, might be caught up in the trade actions after Beijing launched a probe into imports of US sorghum, a grain used in animal feed and liquor.
Japan, the sixth biggest exporter of steel to the US, also hit out.
“The measure could have a grave impact on the economic relationship of Japan and the US… and also on the global economy,” said Foreign Minister Taro Kono, describing the move as “regrettable”.
“Higher tariffs will increase costs for Hyundai and Kia putting them at a disadvantage compared with their rivals in the United States,” a senior South Korean trade ministry official told reporters in a background briefing, referring to Hyundai Motor and Kia Motors.
U.S. security allies like South Korea and Japan see Trump’s steel tariffs as an insult: “When trade friction grows between allies, the alliance is weakened. But it’s unclear if Trump understands that.” https://t.co/9DRNY6nL7v pic.twitter.com/KdYO1N0aEi
— Anna Fifield (@annafifield) March 9, 2018
The South Korean official said the tariffs would impact the renegotiation of the bilateral free trade deal with the United States that is currently underway.
South Korea’s trade minister told local steel makers that nations should try to avoid a trade war.
Bingo. If Trump had an Ambassador to South Korea in place, he might have informed Trump that steel tariffs will hurt South Korea far more than China. Punishing our friends when we need them united with us is strategic idiocy. https://t.co/Szngq5NVvj
— Brian Klaas (@brianklaas) March 8, 2018
Both Mexico and Canada, meanwhile, rejected Trump’s linkage of the levies to ongoing NAFTA talks.
Canada’s foreign affairs minister termed the two things “separate issues” while Mexico’s Economy Ministry said “the negotiation of the NAFTA should not be subject to conditions outside the process.”
Partners promise backlash
Last week Trump stunned the world — and his own aides — with an off-the-cuff announcement of his plan, even before White House lawyers judged the legality of the tariffs.
The metals are used in everything from cars to construction, roads to railways.
While the full economic impact remains unknown, the political fallout was swift with the top Republican in Congress Paul Ryan publicly denouncing Trump’s move, and vowing to push him to narrow its focus to “countries and practices that violate trade law.”
The European Union has promised tariffs on items from steel to peanut butter, bourbon and denim — most of which are produced in states that Trump needs to win re-election.
Even as Trump approved the tariffs, 11 partners in the Asia-Pacific were in Santiago, Chile, to sign a multilateral trade deal embraced by president Barack Obama but rejected by Trump. The deal, known as TTP, was renamed “the Comprehensive and Progressive Trans-Pacific Partnership”, or CPTPP.
— United News America (@UnitedNewsofUSA) March 9, 2018
The White House was left scrambling to catch up following Trump’s shock move last week, as top economic advisor Gary Cohn — who opposed it — quit in protest.
International Monetary Fund Managing Director Christine Lagarde said on Thursday that she feared a "tit-for-tat" escalation of trade retaliation over US President Donald Trump's steel and aluminum tariffs that would sap business confidence and investment.
Lagarde, speaking at a Washington Post forum on women's issues, said it was not the direct economic impact from the tariffs that concerned her most, but its role as a "trigger" for retaliatory responses from trading partners worldwide.
"It is that escalation that is in and of itself dangerous for the impact that it has on all those economies, and furthermore for the impact that it has on confidence," Lagarde said, noting that trade has been an engine of growth that has fueled a stronger global recovery in recent months.
"And confidence is a super-precious good that builds over time and can be destroyed very quickly," Lagarde said. "If the perception of investors around the world is that this is uncertain, and you never know where the tariffs are going to go, how high, how low, against whom ... then you step back and you don't invest, you wait and that confidence impact could be significant."