March 2, 2018, 6:41 AM CST
After President Donald Trump said the U.S. plans to impose 25 percent tariffs on steel imports and 10 percent on aluminum, the shock waves are being felt around the world. Asia’s up in arms, the European Union and Canada are pushing back, and there are plenty of forecasts that U.S. consumers are set to pay a whole bunch more for all sorts of purchases. Think beer cans to autos.
While the exact form of the curbs remains unclear -- especially whether U.S. allies will win exemptions -- the reaction on Friday from outside the world’s biggest economy has been largely negative. Beyond metals, the biggest risk is a tit-for-tat trade war, which draws in other products, possibly foods. We’re following developments here. The time-stamps are New York.
The European Union -- the world’s largest trade bloc -- signaled its response to Trump will involve a combination of tit-for-tat retaliation, “safeguard” measures to prevent a flooding of the EU market with steel diverted from the U.S. and a complaint to the World Trade Organization.
will discuss potential countermeasures on Wednesday.
“We are going to do this according to the rule book,” Winterstein told reporters in Brussels. “But we are going to make sure that we are effective and also firm.”
Donald Trump’s plan to curb U.S. imports of steel on national-security grounds threatens the foundations of the World Trade Organization, warned the European Steel Association.
“This whole issue can blow up the WTO,” Axel Eggert, the industry group’s director general, said in a Bloomberg Television interview in Brussels. “This is not about national security. This is about propping up a U.S. industry that isn’t viable.” He urged Trump to rethink his tariff plan and work with the EU to curb steel overcapacity in China, the biggest producer.
In Berlin, Chancellor Angela Merkel’s chief spokesman said that the German government opposes Trump’s plans. “Such tariffs will severely impact our steel and aluminum industry,” Steffen Seibert told reporters.
Germany’s benchmark DAX index plunged on the potential impact of the U.S. tariffs on Europe’s biggest economy, a manufacturing and exporting powerhouse. It was down 2.3 percent by noon in Berlin.
“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,” Trump says in a tweet.
For 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!”
It was the president’s second tweet of the morning, his first taking aim at U.S. actor Alec Baldwin.
Trump’s move could have a “huge impact” on the industry, according to Axel Eggert, the director general of Europe’s steel lobbying group Eurofer. Steelmakers are concerned that product destined for the U.S. could now be diverted. While China’s overcapacity has caused problems in the global steel industry, Europe, as one of the U.S.’s closest allies shouldn’t be targeted too, Eggert said in a Bloomberg Television interview.
ArcelorMittal just added its voice to the debate and the tone is finely balanced. Governments have a legitimate reason to use a “tough approach” to address unfair trade practices amid significant overcapacity in the steel industry, the producer said. “The greater need, however, is to create a truly sustainable global steel industry, and the only way to do this is for steel-producing nations around the world to work together to address global overcapacity.”
European nations are now pitching in too, and Norway’s remarks amplify what may prove to be the Achilles’ Heel of this whole thing -- what national-security risks is Trump actually pointing to in trade flows, especially when metal comes from your friends and allies? National security as an excuse for protectionism is not constructive, Norway’s Foreign Ministry said. The White House got this far by using Section 232 of the Trade Expansion Act of 1962, which permits the government to explore whether imports undercut national security. Earlier today, the Japanese made much the same observation.
Moody’s Investors Service is weighing in, and it picks out Canada and Bahrain as the top losers, should they get caught in Trump’s net, according to Managing Director Marie Diron. At this stage, while there’s no significant impact on the credit profiles of sovereigns, there was an important warning. “Longer term, tariffs on steel and aluminum could signal a marked deterioration in global trade relations to the extent that they are followed by other measures from the U.S. and potential responses from other countries.”
Trump’s push may mean U.S. aluminum smelters get a good deal busier. There’s about 490,000 tons of idled capacity in the U.S. that could potentially restart, according to Mike Ferraro, who cites Harbor Intelligence data. Ferraro is head of Melbourne-based Alumina Ltd., a producer of alumina and bauxite. Operations that could lift output include plants in Missouri, Kentucky, and Washington state. However, some shuttered capacity is high-cost, so it’s unclear how much of an impetus the tariffs will prove to be, Ferraro said.
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