US Tariffs Sparks Outrage, Allies Hit Back: Global Trade War Feared

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(Image Courtesy: Global Trade Magazine)

Donald Trump campaigned hard against China for razing the United States on trade. However, within a span of 18 months into his presidency, Trump has put the burden of additional tariffs on long time U.S. allies than he has on China. The Trump administration announced new tariffs Thursday on the European Union, Canada and Mexico.

America’s allies are stunned, stocks slid on Wall Street as trade-war fears returned, and economists are warning that Americans will soon face higher prices on a wide variety of products. A slew of Republican lawmakers immediately trashed the move as bad for the economy and foreign relations.

US Allies React

On the other hand, America’s closest allies plan to slap billions of dollars in tit-for-tat tariffs on U.S. goods after the Trump administration announced it is imposing steel and aluminium duties on them.

The reaction was swift after Commerce Secretary Wilbur Ross announced the U.S. on Friday will levy new metals duties on imports from the European Union, Mexico and Canada on national security grounds, ending their temporary exemptions.

The EU said that it would take immediate steps to retaliate, while Mexico vowed to impose duties on everything from U.S. – from flat steel to cheese. Canada’s government announced it will impose tariffs on as much as CUSD 16.6 billion (USD 12.8 billion) of U.S. steel, aluminum and other products from July 1.

In public statements in capitals from Ottawa and Brussels to Washington and Mexico City, politicians expressed their frustration and puzzlement at the U.S. move. House Speaker Paul Ryan attacked the decision in a statement, saying “today’s action targets America’s allies when we should be working with them to address the unfair trading practices of countries like China.”

U.S. Steel and Aluminium Imports in 2017

  1. Canada: USD 12.4 billion
  2. European Union: USD 7.7 billion
  3. Mexico: USD 2.9 billion
  4. China: USD 2.9 billion
  5. Japan: USD 2 billion

What it means for Americans:

Higher prices ~ It is uncertain, at this point, how much prices will go up, but any increase in the cost of metals will likely cause prices of beer cans, cars and many other items to increase, possibly as early as late summer.

Mexico has described the move as unfair. “Faced with tariffs imposed by the U.S., Mexico will impose equivalent measures on numerous products such as flat steel (hot and cold foil, including coated and various tubes), lamps, pork legs and shoulders, sausages and food preparations, apples, grapes, blueberries, various cheeses, among others, up to an amount comparable with the level of the affectation,” it said.

Shipping Industry Apprehensive of Trade War

The Trump administration said it will impose tariffs on steel and aluminium imported from the European Union, Canada and Mexico, in a move almost certain to trigger retaliation by America’s closest allies.

Fears of a global trade war are mounting as the Trump administration also considers tariffs on U.S. auto imports and duties on USD 50 billion in Chinese goods. The International Monetary Fund has warned that a wave of protectionist forces is the biggest risk to the global economic outlook.

The EU had said it wouldn’t make trade concessions to gain a permanent exemption, and vowed to respond firmly to the imposition of tariffs. The 28-member bloc has threatened to complain to the World Trade Organization and impose counter-tariffs on 2.8 billion euros (USD 3.3 billion) of American imports as soon as June 20. EU Trade Commissioner Cecilia Malmstrom has said that the details of the U.S. decision would guide the EU’s response.

(Image Courtesy: Chicago Sun-Times)

Impact on Imports, Shipping and Overall Trade

Trump’s latest move is more like a slap. It’s likely to sting more, because about 80 per cent of imports are covered by the tariffs now. Prices of metals will almost certainly rise in the United States. The tariffs affect billions of dollars of steel and aluminium, but that is relatively small in the context of the USD 19 trillion American economy.

“To increase tariffs in the name of national security is absurd,” said Matthew Rooney, managing director of the Bush Institute, who worked for many years at the State Department. “It’s dangerous. It opens the door to other trading partners using national security as a justification to break their free-trade agreements.”

“Tariffs on steel and aluminium imports are a tax hike on Americans and will have damaging consequences for consumers, manufacturers and workers,” said Senator Orrin Hatch of Utah, chairman of the Finance Committee, which oversees trade in the upper chamber.

(References: Bloomberg, Automotive News Europe, NDTV, Quint)

Sea News Feature, June 1