U.S. delays decision on tariffs for EU

The U. S. government will take another 30 days to decide whether to impose tariffs on imports of steel and aluminum from the European Union, Canada and Mexico, extending a period of uncertainty for businesses in those regions.

The delay helps the U.S. avoid a potential trade war with allies as it prepares for tense trade talks in China this week. But the EU slammed the decision as bad for business that “prolongs market uncertainty, which is already affecting business decisions.”

“As a longstanding partner and friend of the U.S., we will not negotiate under threat,” the EU said in a statement Tuesday.

The Trump administration said Monday it had reached an agreement with South Korea on steel imports following discussions on a revised trade agreement. And the administration said it had also reached agreements in principle with Argentina, Australia and Brazil on steel and aluminum that will be finalized shortly.

“In all of these negotiations, the administration is focused on quotas that will restrain imports, prevent transshipment and protect the national security,” the White House said.

Facing a self-imposed deadline, President Donald Trump was considering whether to permanently exempt the EU and Mexico, Canada, Australia, Argentina and Brazil from tariffs of 25 per cent on imported steel and 10 per cent on imported aluminum that his administration imposed in March. The White House had given itself until the end of Monday to decide whether to extend the exemptions.

The EU has taken a tough stance, raising the prospect of a trade war if the U.S. does not back down. It has a list of retaliatory tariffs worth about US$3.5 billion on imports from the U.S. that it will activate if the EU loses its exemption.

Germany said it continues to expect a permanent exemption. The EU’S largest steel exporter to the U.S., it accounted for about five per cent of U.S. steel imports last year.

“Neither the EU nor the U.S. can have an interest in an escalation of their trade tensions,” a spokeswoman for Chancellor Angela Merkel said Tuesday in a statement.

European financial officials have cited the trade tensions created by the U.S. tariffs proposal as a risk to the economy. Some surveys suggest a downtick in business and consumer confidence, though it’s unclear how big an impact the trade tensions are having.

While experts say the immediate potential damage from the aluminum and steel tariffs is limited, the danger is of a tit-for-tat escalation in which both sides slap more duties on each other’s goods.

“The imposition of tariffs might signal that the two regions are heading towards a more serious trade conflict,” said Stephen Brown, European economist at Capital Economics.

Trump says he wants to protect American metal producers from unfair competition and bolster national security. But the tariffs’ announcement in March, which followed an intense internal White House debate, triggered harsh criticism from Democrats and some Republicans and roiled financial markets.

At the time, Trump excluded several vital trading partners — the EU, Mexico, Canada, Australia, Argentina and Brazil — from the tariffs.

That meant the steel tariff covered just 30 per cent of all imports, according to Oxford Economics. If all the exemptions were ended, it would have deepened the impact of the tariffs on American companies that use steel and potentially affect financial markets. Stock prices fell nearly two per cent when the tariffs were announced.

Two people familiar with the process said the Trump administration had been considering whether to provide a short-term extension of the exemptions to allow for more time to review the countries’ efforts to secure permanent exemptions.

The EU and others had been asked to spell out what limits they could accept on the amount of steel they export to the United States, how they would address the issue of excess production of steel and aluminum, and how they would support the U.S. before international bodies like the World Trade Organization.

Security relationships with the U.S. have also been part of the criteria.