We’ll all feel pain of steel wars, May warns Trump

Plan for tariffs on heavy industry imports risks damaging trade conflict, PM tells president

THERESA MAY has told Donald Trump not to start a trade war as she warned the US president of her “deep concern” at his plan to introduce tariffs on steel and aluminium imports to America.

However, the White House yesterday appeared to reject appeals for a rethink from Canada, the EU, and Britain, saying there would be no exemptions for even for close allies.

Peter Navarro, a White House trade adviser, told US media: “As soon as he starts exempting countries, he has to raise the tariff on everybody else. As soon as he exempts one country, his phone starts ringing with the heads of state of other countries.”

It came after Beijing warned that it would “not sit idly by” should the trade tariffs hurt their economic interest, raising the spectre of a trade war between the two superpowers.

Zhang Yesui, a spokesman for the National People’s Congress, said: “China doesn’t want a trade war with the US. But if the US takes actions that hurt Chinese interests, China will not sit idly by.” An official English-language interpreter added the phrase, “and will take necessary measures”.

The diplomat warned “policies informed by misjudgment or wrong perceptions will hurt relations and bring consequences no side wants to see”.

Following a phone call between Mrs May and the president yesterday, a Downing Street spokesman said: “The Prime Minister raised our deep concern at the president’s forthcoming announcement on steel and aluminium tariffs, noting that multilateral action was the only way to resolve the problem of global overcapacity in all parties’ interests.”

In a further escalation, Mr Trump has said the US “will simply apply a tax” on cars made in Europe if the EU retaliates against the trade penalties he is seeking on imports of steel and aluminium.

David Lidington, Mrs May’s deputy, told BBC One’s Sunday Politics: “The US is not taking an advisable course in threatening a trade war. Trade wars don’t do anybody any good.”

Brussels is promising retaliation against American exports if Mr Trump follows through on his idea, which he is warning he will do next week.

But the president tweeted: “If the EU wants to further increase their already massive tariffs and barriers on US companies doing business there, we will simply apply a tax on their cars which freely pour into the US. They make it impossible for our cars (and more) to sell there. Big trade imbalance!”

Mr Lidington warned Mr Trump his plan would not work. “We tried in Britain in the Sixties and Seventies protecting our car industry from competition,” he said. “It actually didn’t work, it protected inefficiencies, we lost all our export markets because our competitors who were more competitive went out and gobbled those up from us.”

♦ US lobbyists are calling for the UK to drop geographical name protections after Brexit, which would mean products like Cornish pasties and Melton Mowbray pork pies could be made in America, according to the i. Under EU law, such items – like Champagne and Parmesan cheese – cannot be made away from its namesake area.

‘Multilateral action is the only way to resolve the problems of overcapacity in all parties’ interests’

Donald Trump did not hide his protectionist instincts during the presidential election campaign of 2016. But to see his America First pledges translated into policies that may presage a global trade war still comes as a shock. The US leader has begun the process of fulfilling his promise to slap huge tariffs on steel and aluminium. The response has been predictable. China, against whom the trade barriers would principally be erected, has vowed to hit back. The EU has now threatened to retaliate against American cars, prompting Mr Trump to reach for his own countermeasures.

This is how trade wars start, with a ratcheting up of the rhetoric followed by tit-for-tat actions that slow down global growth and hit the poorest hardest. The president thinks he is protecting the livelihoods of US workers whose jobs are being lost as a result of what the Americans regard as unfair trade. And on one level, he is right: the idea that Chinese steel is manufactured under the auspices of a free-trade model is fanciful.

Mr Trump commissioned studies from the US Department of Commerce which found cheap steel was being dumped because of China’s excess production. The department recommended a 24 per cent increase in steel tariffs from all countries and of at least 53 per cent on imports from 12 countries including China. It also accused Beijing of subsidising aluminium foil exports which were then sold at half the “fair” price. This was not, in other words, a policy made up by Mr Trump on the hoof but part of his direction of travel since entering the White House. In particular it plays to his working class base, whose jobs and factories have disappeared overseas.

But while it may be politically understandable, it is economically short-sighted. In the long run, trade wars harm everyone. In Britain, where our imminent departure from the EU has triggered renewed interest in free global trade, the impact would be considerable. America is a crucial market for Britain’s steel industry, with UK companies exporting about 250,000 tonnes there annually – about 7 pc of total exports – and worth about £330 million a year. Our producers do not dump cheap steel and it would be unfair if they were punished for the sins of others. The Government must make its concerns clear to Washington.