So much for al­lies – US sets met­als tariffs

The Timaru Herald - - FRONT PAGE -

‘‘This is pro­tec­tion­ism, pure and simple,’’ said Jean-Claude Juncker, pres­i­dent of the Euro­pean Com­mis­sion.

The EU ear­lier threat­ened to coun­ter­punch by tar­get­ing US prod­ucts, in­clud­ing Ken­tucky bour- bon, blue jeans and mo­tor­cy­cles. David O’Sul­li­van, the EU’s am­bas­sador in Wash­ing­ton, said the re­tal­i­a­tion will prob­a­bly be an­nounced in late June.

Mex­ico com­plained that the tariffs will ‘‘dis­tort in­ter­na­tional trade’’ and said it will pe­nalise US im­ports in­clud­ing pork, ap­ples, grapes, cheeses and flat steel.

In Canada, Prime Min­is­ter Justin Trudeau said: ‘‘These tariffs are to­tally un­ac­cept­able.’’ Canada an­nounced plans to slap tariffs on US$12.8 bil­lion worth of US prod­ucts, rang­ing from steel to yo­ghurt and toi­let pa­per.

‘‘Canada is a se­cure sup­plier of alu­minum and steel to the US de­fence in­dus­try, putting alu­minum in Amer­i­can planes and steel in Amer­i­can tanks,’’ Trudeau said. ‘‘That Canada could be con­sid­ered a na­tional se­cu­rity threat to the United States is in­con­ceiv­able.’’

Trump had cam­paigned for pres­i­dent on a prom­ise to crack down on trad­ing part­ners that he said ex­ploited poorly ne­go­ti­ated trade agreements to run up big trade sur­pluses with the US.

The US tariffs co­in­cide with – and could com­pli­cate – the Trump administration’s sep­a­rate fight over Bei­jing’s strong-arm tac­tics to over­take US tech­no­log­i­cal supremacy. Ross is leav­ing today for Bei­jing for talks aimed at pre­vent­ing a trade war with China.

The world’s two big­gest economies have threat­ened to im­pose tariffs on up to US$200 bil­lion worth of each other’s prod­ucts.

The steel and alu­minum tariffs could also com­pli­cate the administration’s ef­forts to rene­go­ti­ate the North Amer­i­can Free Trade Agree­ment with Canada and Mex­ico, a pact that Trump has con­demned as a job-killing ‘‘dis­as­ter.’’

Trump of­fered the two US neigh­bours a per­ma­nent ex­emp­tion from the steel and alu­minum tariffs if they agreed to US de­mands on Nafta. But the Nafta talks stalled.

Ross said that there was ‘‘no longer a very pre­cise date when they may be con­cluded,’’ and that as a re­sult, Canada and Mex­ico were added to the list of coun­tries hit with tariffs.

Like­wise, the Trump trade team sought to use the tar­iff threat to pres­sure Europe into re­duc­ing bar­ri­ers to US prod­ucts. But the two sides could not reach an agree­ment.

The im­port du­ties will give a boost to Amer­i­can mak­ers of steel and alu­minum by mak­ing for­eign met­als more ex­pen­sive. But com­pa­nies in the US that use im­ported steel will face higher costs.

And the tariffs will al­low do­mes­tic steel and alu­minum pro­duc­ers to raise prices, squeez­ing com­pa­nies – from au­tomak­ers to can pro­duc­ers – that buy those met­als.

Prices started ris­ing even be­fore all the tariffs kicked in. Strip­matic Prod­ucts, an auto parts sup­plier in Cleve­land, has seen a 40 per cent in­crease in the price of steel. The higher cost meant it lost out this year to a Chi­nese com­pany on a con­tract to branch out into a new mar- ket: mak­ing food-pro­cess­ing equip­ment.

‘‘We were ba­si­cally elim­i­nated from con­tention,’’ said Strip­matic pres­i­dent Bill Adler. He said the com­pany needed four or five years to re­cover the last time the US im­posed tariffs on steel, in 2002.

Mea­sured purely in dol­lars, the tariffs don’t amount to much in Amer­ica’s US$20 tril­lion econ­omy. Speak­ing on CNBC yes­ter­day, Ross called the tariffs ‘‘blips on the radar screen.’’

But Oliver Rakau, an econ­o­mist with Ox­ford Eco­nomics, warned that the tariffs could cause eco­nomic dam­age be­cause ‘‘the spec­tre of an es­ca­la­tion is likely to weigh on busi­ness sen­ti­ment and may de­rail the in­vest­ment re­cov­ery.’’

The Trump administration is turn­ing to a lit­tle-used weapon in trade pol­icy: Sec­tion 232 of the Trade Ex­pan­sion Act of 1962. It em­pow­ers the pres­i­dent to re­strict im­ports and im­pose un­lim­ited tariffs if the Com­merce Depart­ment sees a threat to na­tional se­cu­rity.

Europe, Ja­pan and other US trad­ing part­ners are con­test­ing the US tariffs at the World Trade Or­gan­i­sa­tion.

The WTO gives coun­tries broad lee­way to de­ter­mine na­tional se­cu­rity in­ter­ests. But there was an un­writ­ten agree­ment that WTO mem­ber coun­tries would use the na­tional-se­cu­rity jus­ti­fi­ca­tion spar­ingly to avoid abuses.

Now that Trump has bro­ken the taboo, crit­ics fear that other coun­tries will im­pose sanc­tions.

Crit­ics say the steel and alu­minum tariffs would do lit­tle to ad­dress the real prob­lem plagu­ing met­als pro­duc­ers around the world: mas­sive over­pro­duc­tion by China that has flooded world alu­minum and steel mar­kets. Canada, a staunch US ally, is the largest sup­plier of steel and alu­minum to the United States.

‘‘The administration’s trade reme­dies should specif­i­cally tar­get struc­tural alu­minum over­ca­pac­ity in China, which is caused by ram­pant, il­le­gal govern­ment sub­si­dies,’’ said Heidi Brock, pres­i­dent of the Alu­minum As­so­ci­a­tion, which rep­re­sents alu­minum pro­duc­ers, fab­ri­ca­tors, re­cy­clers and sup­pli­ers.

Ross said ne­go­ti­a­tions with Mex­ico, Canada and the EU can con­tinue even once the tariffs are in place.

But Philip Levy, se­nior fel­low at the Chicago Coun­cil on Global Af­fairs and a for­mer White House trade ad­viser, said: ‘‘I don’t think this is pre­lude to a se­ries of deals. If any­thing, this kills the pos­si­bil­ity of deals.’’

If the US can im­pose tariffs any time it de­clares im­ports a threat to na­tional se­cu­rity, Levy asked, ‘‘Why would any­one want to ne­go­ti­ate with us?’’– AP

Cana­dian Prime Min­is­ter Justin Trudeau said dur­ing a news con­fer­ence in Ot­tawa, On­tario, that the new US tariffs were ‘‘to­tally un­ac­cept­able’’.

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