Trump starts trade war with al­lies

Financial Mirror (Cyprus) - - FRONT PAGE -

Pres­i­dent Don­ald Trump an­nounced on Thurs­day that the United States would slap tar­iffs on steel and alu­minium from the EU, Canada and Mex­ico, prompt­ing Europe to say it would re­spond with “coun­ter­bal­anc­ing mea­sures within hours” in what amounts to a trade war with Wash­ing­ton.

US Sec­re­tary of Com­merce Wil­bur Ross said the ad­min­is­tra­tion had de­cided not to grant a per­ma­nent ex­emp­tion to the Euro­peans, Canada and Mex­ico. As a re­sult, steel and alu­minium ex­ports from these part­ners to the US would suf­fer du­ties of 25% and 10% re­spec­tively.

Other coun­tries in­clud­ing Ar­gentina and Brasil ac­cepted to limit their ex­ports. A quota on ex­ports was dis­cussed be­tween the Com­mis­sion and the US ne­go­ti­a­tion teams over the past weeks but was even­tu­ally dis­carded by the EU lead­ers.

Top EU of­fi­cials have made clear in re­cent weeks they see re­la­tions with the US and its mav­er­ick, pro­tec­tion­ist pres­i­dent as the biggest chal­lenge for the bloc.

Fol­low­ing the an­nounce­ment, Euro­pean Com­mis­sion Pres­i­dent Jean-Claude Juncker said the EU would an­nounce “coun­ter­bal­anc­ing mea­sures in the next hours” and would also pre­sent a set­tle­ment dis­pute at the World Trade Or­gan­i­sa­tion.

Juncker said the tar­iffs were “to­tally un­ac­cept­able”. “This is pro­tec­tion­ism, pure and sim­ple,” he added.

The Com­mis­sion will ac­ti­vate coun­ter­mea­sures that would hit US ex­ports worth a total of ?6 bil­lion. The list of prod­ucts af­fected, ap­proved when Trump first an­nounced the tar­iffs in April, in­cludes Amer­i­can hall­mark prod­ucts such as Levi’s jeans, Har­ley David­son mo­tor­bikes, or ex­ports com­ing from the con­stituen­cies of key Repub­li­can fig­ures, such as bour­bon whiskey.

Trump said the tar­iffs were im­posed on the grounds of na­tional se­cu­rity, as the dump­ing of steel forced the clo­sure of fac­to­ries and led to job losses.

But Europe ar­gued that im­pos­ing tar­iffs on al­lies was not the solution to steel over­ca­pac­ity.

Ross stressed that “the pres­i­dent’s over­whelm­ing ob­jec­tive is to re­duce our trade deficit,” to­talling EUR 120 bln with Europe.

EU lead­ers of­fered to start trade talks with the US Ad­min­is­tra­tion, but only af­ter Trump granted a per­ma­nent ex­emp­tion on the tar­iffs. As part of the pro­posal, the Euro­peans were ready to dis­cuss mar­ket ac­cess of in­dus­trial prod­ucts, in­clud­ing cars.

But Juncker in­sisted again on Thurs­day that “the EU will not ne­go­ti­ate un­der threat.”

“The US has sought to use the threat of trade re­stric­tions as lever­age to ob­tain con­ces­sions from the EU,” said Trade Com­mis­sioner Ce­cilia Malm­ström.

“This is not the way we do busi­ness, and cer­tainly not be­tween long­stand­ing part­ners, friends and al­lies,” she added in a state­ment.

The trade war be­tween the EU and the US, the world’s largest eco­nomic blocs, started as mar­ket tur­bu­lence re­turned to the eu­ro­zone with the po­lit­i­cal cri­sis in Italy, where the Five Star Move­ment and Lega’s coali­tion agree­ment put the coun­try on a col­li­sion course with the EU.

Trump’s de­ci­sion to slap tar­iffs on his al­lies was criticised by com­pa­nies on both sides of the At­lantic.

Euro­fer, the Euro­pean Steel As­so­ci­a­tion, called Trump’s mea­sure “naked pro­tec­tion­ism”.

“To­day is a bad day for the world trade sys­tem”, said Axel Eg­gert, direc­tor gen­eral of Euro­fer. “How­ever, what’s done is done. The EU thus needs to act swiftly in its own in­ter­est to de­fend the in­ter­nal mar­ket from the im­pact of steel de­flected from the US bor­der to the largest open steel mar­ket in the world: Europe’s” Eg­gert said.

The Amer­i­can Cham­ber of Com­merce to the EU said that “we are very con­cerned by the dam­age a tit-for-tat dis­pute would cause to the transat­lantic econ­omy”.

The or­gan­i­sa­tion rep­re­sent­ing US com­pa­nies in Europe said that the EU had met all the cri­te­ria for a per­ma­nent ex­emp­tion and warned that the de­ci­sion puts “the global trad­ing sys­tem at risk”.

Busi­nessEurope, a pri­vate sec­tor or­gan­i­sa­tion, said the EU “should have a pro­por­tion­ate re­ac­tion to ef­fec­tively de­fend its rights in a WTO-con­form way,” its direc­tor gen­eral Markus J. Beyrer com­mented.

“Global trade is cur­rently un­der high pres­sure and com­pa­nies are suf­fer­ing the most from un­cer­tainty and mar­ket volatility,” he said.

“The EU has to re­act im­me­di­ately with a firm but pro­por­tion­ate re­sponse. Un­fair trade must be fought in the WTO and in the G20 Global Fo­rum on Steel Ex­cess Ca­pac­ity. Re­forms of trade rules are pos­si­ble, but through ne­go­ti­a­tions in these fora and not through uni­lat­eral mea­sures,” said the Chair­man of In­ter­na­tional Trade Com­mit­tee of the Euro­pean Par­lia­ment, Bernd Lange (S&D, Ger­many).

“No­body will ben­e­fit from this de­ci­sion. The Transat­lantic re­la­tion­ship is go­ing down­hill while busi­nesses and con­sumers are be­ing thrown into great un­cer­tainty,” added Ma­ri­etje Schaake, the ALDE group’s spokesper­son on trade.

“Trump leaves us no choice. Europe must im­me­di­ately adopt re­bal­anc­ing coun­ter­mea­sures. While Trump opts for ‘Amer­ica-first’ pro­tec­tion­ism, Europe must stick to­gether and con­tinue to in­vest in strength­en­ing the global trad­ing sys­tem based on rules.”

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