U.S. eases way to more tariff exemptions under pressure from allies

WASHINGTON/BRUSSELS/SHA NGHAI, (Reuters) - The United States opened the way for more exemptions from its steel and aluminum tariffs yesterday, after pressure from allies and intense lobbying from lawmakers, further diluting the measures just a day after they were formally announced.

President Donald Trump, who has broad powers to impose the tariffs of 25 percent on steel imports and 10 percent on aluminum, at the outset granted exemptions to Canada and Mexico, and said there would be the possibility of industry exemptions, although he has not been specific.

After Trump opened the door, Brazil, Japan, South Korea, Australia and Europe clamored for special treatment, while Chinese producers called on Beijing to retaliate in kind.

Trump tweeted on Friday that he spoke with Australian Prime Minister Malcolm Turnbull about trade and military cooperation. “Working very quickly on a security agreement so we don t have to impose steel or aluminum tariffs on our ally, the great nation of Australia!” Trump said.

Treasury Secretary Steven Mnuchin earlier said he expects countries in addition to Mexico and Canada to be exempted in the next couple of weeks.

When proposed tariffs were initially announced, stock markets went into a tail spin on concerns they would ignite a global trade war. But since Trump signaled that exemptions were possible, reaction has been measured, and counter threats have been carefully calibrated so far.

Those threats have been overblown, according to Dani Rodrik, professor of international political economy at Harvard University s John F. Kennedy School of Government and one of the world’s leading experts on trade.

“The reality is that Trump s trade measures to date amount to small potatoes. In particular, they pale in comparison to the scale and scope of the protectionist policies of President Ronald Reagan s administration in the 1980s,” Rodrik wrote on Friday.

Tokyo and Brussels rejected any suggestion that their exports to the United States threatened the country’s national security - Trump’s justification for imposing the tariffs despite warnings at home and abroad that they could provoke a global trade war.