Global trade war fears growing
UNITED STATES: US President Donald Trump and the European Union exchanged warning shots yesterday as world markets braced themselves for a bruising trade war.
The resignation of Gary Cohn, Trump’s chief economic adviser, appeared to signal the president’s determination to impose steep tariffs on imported steel and aluminium.
Trump is thought to have summoned Cohn, a former Goldman Sachs banker and the most influential free-trade proponent inside his administration, to the Oval Office on Wednesday to demand that he support plans to impose a levy of 25 per cent on imported steel and 10 per cent on aluminium. Cohn refused to drop his objections, and hours later the White House announced his resignation.
Even as his staff were scrambling to announce Cohn’s departure, Trump denied that his administration was tumbling into chaos. ‘‘It’s got tremendous energy. It’s tough. I like conflict,’’ he said. ‘‘So many people want to come in. I have a choice of anybody. I could take any position in the White House, and I’ll have a choice of the 10 top people having to do with that position. Everybody wants to be there.’’
EU Trade Commissioner Cecilia Malmstrom warned Trump that tariffs on EU steel and aluminium would prompt retaliation.
The EU has identified potential targets for tariffs, including orange juice from the politically influential swing state of Florida; bourbon from Kentucky, the home state of Mitch McConnell, the senior Republican in the Senate; and Harley-Davidson motorcycles, which has its headquarters in Wisconsin, the home of Paul Ryan, the Republican Speaker of the House.
Tariffs on steel would ‘‘put thousands of European jobs in jeopardy, and it has to be met by a firm and proportionate response’’, Malmstrom said.
Trump gave no hint of giving ground. Since George H W Bush was in office, ‘‘our country has lost more than 55,000 factories,
6,000,000 manufacturing jobs and accumulated trade deficits of more than 12 trillion dollars’’, he wrote in an early-morning tweet. ‘‘Last year we had a trade deficit of almost 800 billion dollars. Bad policies & leadership. Must WIN again!’’
He also said on Twitter that he had asked China ‘‘to develop a plan for the year of a one billion dollar reduction in their massive trade deficit with the United States’’.
It was not clear what he meant. The US trade deficit with China was US$375 billion last year – or
US$1 billion a day. Also, China holds a trade surplus with the US, not a deficit.
Wilbur Ross, the US commerce secretary, sounded a more conciliatory note. ‘‘We’re not trying to blow up the world. There’s no intention of that,’’ he told CNBC. ‘‘We’re not looking for a trade war. We’re going to have very sensible relations with our allies.’’
Greg Hands, the British trade minister, told a parliamentary committee: ‘‘We are very disappointed by the president’s apparent intention to do this, but we do actually await something more concrete as to what may happen.’’
The US is the world’s largest importer of steel, and the EU is the biggest exporter of steel to America. The White House said that more details of Trump’s plans for tariffs would be released this week or next week. It is possible that some countries will be exempt.
Steven Mnuchin, the treasury secretary, said it was possible that the White House would issue waivers for certain countries, but no decisions had been made. He added that Mexico and Canada would probably be exempted from tariffs if a new North American Free Trade Agreement was negotiated.
‘‘We are definitely going to end up with these tariffs, and we’re going to roll this out very, very quickly,’’ he said.
Trump has complained of the US being exploited by its trading partners for decades, but the abrupt downfall of moderate figures inside his administration has stunned Washington.
Cohn, a registered Democrat, had led the White House national economic council for 14 months. His exit will heighten speculation that the influence of the West Wing’s centrists – who include Ivanka Trump, the president’s eldest daughter, and her husband, Jared Kushner – is waning.
Cohn oversaw the largest revamp of the US tax code in decades, delivering Trump’s first legislative success last year. But he had frequently found himself at odds with a president who ran as a populist. He was on the losing side of an attempt to keep the US inside the Paris climate accord, and was asked to oversee a US$1 trillion infrastructure investment plan that has gained little traction. He nearly resigned last year after being shocked by comments Trump made in the wake of a neoNazi rally in Charlottesville, Virginia.
"We are definitely going to end up with these tariffs, and we're going to roll this out very, very quickly."
Steven Mnuchin, treasury secretary