The Real Risks of Trump’s Steel and Aluminum Tariffs
A higher price for metals isn’t the main concern; it’s the chance that the global trade system will be undermined.
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The most immediate losers are the industries that rely on steel and aluminum as an input and will face higher prices. That includes some of the nation’s biggest industries: the automobile sector; aerospace; heavy equipment; and construction. In short, the chassis of a Ford, the body of a Caterpillar bulldozer, the wings of a Boeing aircraft, and the steel girders inside a New York skyscraper are all about to get more expensive.
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The risk comes from the potential ripple effects.
Affected countries may well retaliate by ordering tariffs on American goods, and they could carefully target goods to cause economic or political pain. American exporters — whether they sell passenger airplanes or soybeans — should be nervous about the next shoe to fall. There are few winners in an all-out trade war like one that enveloped the world economy in the 1930s.
In particular, the Trump administration’s invocation of national security concerns could set a precedent in which China and other nations are willing to use national security as grounds for tariffs, hurting the ability of the World Trade Organization to arbitrate disputes.
E.U. Leader Threatens to Retaliate With Tariffs on Bourbon and Bluejeans
"He could have just targeted China and Russia..."
By MELISSA EDDY and CHAD BRAYMARCH 2, 2018
Wagons with steel at the Krupp Mannesmann steel factory in Duisburg, Germany, on Friday. President Trump risked sparking a trade war, German officials warned. Credit Martin Meissner/Associated Press
BERLIN — The European Union will hit back at the heart of the United States, slapping tariffs on products like Harley-Davidsons, Kentucky bourbon and bluejeans, if President Trump goes ahead with a plan to place tariffs on steel and aluminum imports, the president of the bloc’s executive arm vowed on Friday.
Jean-Claude Juncker, president of the European Commission, made the remarks to the German news media in reaction to the proposed tariffs. He said the plans to tax the American goods, produced in the home states of key Republican leaders, had not yet been finalized, but amounted to treating them “the same way” that European products would be handled if the metals tariffs go through.
“None of this is reasonable, but reason is a sentiment that is very unevenly distributed in this world,” Mr. Juncker declared. He said any measures taken by the bloc would conform with rules set by the World Trade Organization.
Steffen Seibert, a spokesman for the German chancellor, Angela Merkel, said on Friday that the government “rejects” the tariffs, adding that such measures could lead to a global trade war, which “can’t be in anyone’s interest.”
Hans Jürgen Kerkhoff, president of the German Steel Federation, said on Friday:
- “These measures clearly violate the rules of the World Trade Organization. If the E.U. does not react, our steel industry will pay the bill for U.S. protectionism.” -
He called on the bloc to take action, through the W.T.O.
Simon Clarke, a Conservative member of Britain’s Parliament and vice chairman of the All Party Parliamentary Group on Steel and Metal Related Industries, wrote on Twitter .. https://twitter.com/SimonClarkeMP/status/969507769169608704 .. on Friday:
- “Tariffs are the worst possible option for the world economy and a major threat to U.K. steel in particular.” -
- “Donald Trump is putting jobs at risk on both sides of the Atlantic. Thousands of steelworkers across the country voted for Brexit on the promise it would deliver a new era of international trade.” -
He called on Prime Minister Theresa May to ensure that steel products exported by Britain were exempt from the proposed tariffs.
The global reactions hinted at a looming trade war if Mr. Trump followed through on campaign promises of an “America First” trade policy. On Friday, the president doubled down on his promise in a Twitter post .. https://twitter.com/realDonaldTrump/status/969525362580484098 :
- “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.” He added later, “If you don’t have steel, you don’t have a country!” -
- Donald J. Trump @realDonaldTrump
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! - - Donald J. Trump @realDonaldTrump
We must protect our country and our workers. Our steel industry is in bad shape. IF YOU DON’T HAVE STEEL, YOU DON’T HAVE A COUNTRY! -
Pressed for reaction to Mr. Trump’s first tweet .. https://twitter.com/realDonaldTrump/status/969525362580484098 , which was sent in the course of a regular weekly government news conference, Mr. Seibert declined to comment, except to say, “The German government has not changed its position in the past 18 minutes.”
The White House has said that the tariff details remain to be worked out, and Mr. Seibert said the German government was awaiting the exact details before assessing the scope of the impact.
But Germany made clear that Berlin viewed such measures as damaging to the country’s steel industry. Foreign Minister Sigmar Gabriel said he viewed the proposal with “great concern” and defended his country’s practices in the industry.
The United States is the most important export country for German rolled steel products and the second-most important destination for the European Union, after Turkey, according to official government statistics.
Mr. Gabriel said, “Such a sweeping blow from the U.S. would reverberate around the world, but our exports and jobs would be among the hardest in the world hit.”
Dieter Kempf, head of the Federation of German Industries, warned that Mr. Trump was risking a “spiral of protectionism” that in the end would cost American jobs, as well as those in Germany and the rest of Europe.
But Mr. Kempf urged everyone to “keep a cool head” in an effort to avoid feeding the flames of a global trade war.
Mr. Juncker’s proposal to hit back at the United States through some of the products for which it is best known in Europe was first floated last month in the German news media. The German daily Frankfurter Allgemeine Zeitung cited a plan to target the home states of influential members of the Republican Party, including Senator Mitch McConnell of Kentucky and the House speaker, Paul D. Ryan of Wisconsin.
“We are here and they will get to know us,” Mr. Juncker said. Asked if he believed a trade war was brewing, he responded, “I can’t see how this isn’t part of warlike behavior.”
President Trump doubled down on his promise, tweeting on Friday, “Trade wars are good, and easy to win.” Credit Tom Brenner/The New York Times
Bruno Le Maire, the French economy minister, speaking to reporters in Paris, said the tariffs would have a “major impact” on the European economy and on a number of French companies.
He said that the steel and aluminum industries were in a “particularly fragile” situation and that certain countries practiced “dumping” and “massive subsidies” that distorted trade.
“American authorities know this perfectly well,” he said. “That is the topic that needs to be addressed, and not another.” He added, “A trade war between Europe and the United States will only result in losers.”
Officials around the world have been voicing varying degrees of dismay and anger since the proposal was unveiled on Thursday.
The United States has much to lose in a metals trade war with Canada, a crucial strategic ally and major trading partner, Ms. Freeland said. She noted that the United States has a steel trade surplus with its northern neighbor, which is both the largest buyer of American steel and the largest seller of steel to the United States.
On Friday, the criticism continued, with Australia’s trade minister, Steven Ciobo, saying that Mr. Trump’s action would provoke retaliatory measures that would hurt everyone. “The imposition of a tariff like this will do nothing other than distort trade and, ultimately, we believe, will lead to a loss of jobs,” he said.
At a daily briefing on Friday, a Chinese Foreign Ministry spokeswoman, Hua Chunying, said: “China urges the United States to exercise restraint in using trade protectionism tools.”
But Li Xinchuang, vice chairman of the China Iron and Steel Association, was more blunt. In a phone interview on Friday, he said: “I feel Trump’s decision is stupid. It will only make the U.S. steel industry, which is already 10 years behind China, more left behind.”
He added, “Trump’s decision does no good to everyone except a few American steel enterprises. Trump is a businessman, and he should understand win-win. But he took such extreme action.”
The countries hit hardest by the proposed tariffs would be Canada, Mexico, Brazil and South Korea, which together account for almost half of United States steel imports. The United States is also a substantial market for Britain’s steel industry.
In an emailed statement on Friday, UK Steel, an industry group, said that almost 15 percent of Britain’s steel exports or 360 million pounds ($496 million) a year went to the United States. Richard Warren, the group’s head of policy, said in an email of the proposed tariffs: “This would be a unilateral and extremely blunt approach to what is a complex global problem of overcapacity in the steel sector.”
Arcelor Mittal, the world’s biggest steel maker and the largest steel producer in Europe and the United States, said it was assessing the possible impact of Mr. Trump’s proposal.
But in a sign of the potentially adverse effects that Mr. Trump’s plan may have on the American economy, Electrolux, a global maker of household appliances, said on Friday that it would delay a planned $250 million investment to expand and modernize a factory in Tennessee.
“We’re concerned about the impact that the tariffs could have on the competitiveness of our U.S. operations,” the company said in a statement, adding it would seek more details of Mr. Trump’s plan before deciding whether to move forward.
In what was considered a rare comment on a member’s trade stance, Roberto Azevêdo, the World Trade Organization’s director general, said in a statement: “The W.T.O. is clearly concerned at the announcement of U.S. plans for tariffs on steel and aluminum. The potential for escalation is real, as we have seen from the initial responses of others.”
He added: “A trade war is in no one’s interests. The W.T.O. will be watching the situation very closely.”
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Melissa Eddy reported from Berlin, and Chad Bray from London. Richard Pérez-Peña and Stanley Reed contributed reporting from London, Sui-Lee Wee and Ailin Tang from Beijing, and Aurelien Breeden and Elizabeth Alderman from Paris.
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