US allies hit back at Washington's steel, aluminum tariffs

World
Europe

Canada and Mexico retaliated against the United State’s decision on Thursday to impose tariffs on steel and aluminum imports and the European Union had its own reprisals ready to go, reigniting investor fears of a global trade war.

The tariffs, announced by US Commerce Secretary Wilbur Ross in a telephone briefing on Thursday, ended months of uncertainty about potential exemptions and suggested a hardening of the Trump administration’s approach to trade negotiations.

File photo of US Commerce Secretary Wilbur Ross testifying about US tariffs on steel and aluminum imports during a House Ways and Means Committee hearing on Capitol Hill in Washington, DC, March 22, 2018 /VCG Photo

The measures, touted by President Donald Trump in March, drew condemnation from Republican lawmakers and the country’s main business lobbying group and sent a chill through financial markets.

The Dow Jones Industrial Average lost one percent and the S&P 500 shed around 0.66 percent. Shares of industrial heavyweights Boeing fell 1.7 percent and Caterpillar 2.2 percent.

A 25 percent tariff on steel imports and 10 percent tariff on aluminum imports will be imposed on the EU, Canada and Mexico from midnight (0400 GMT on Friday), Ross told reporters.

"We look forward to continued negotiations, both with Canada and Mexico on the one hand, and with the European Commission on the other hand, because there are other issues that we also need to get resolved, he said.

Canada and Mexico, embroiled in talks with the United States to modernize the North American Free Trade Agreement (NAFTA), responded swiftly.

Canada

Canada's Prime Minister Justin Trudeau takes part in a news conference in Ottawa, Ontario, Canada, May 31, 2018. /Reuters Photo

Canada, the largest supplier of steel to the United States, will impose tariffs covering 16.6 billion Canadian dollars (12.8 billion US dollars) on imports from the United States, including whiskey, orange juice, steel, aluminum and other products, Canadian Foreign Minister Chrystia Freeland said.

The Canadian tariffs are set to go into effect on July 1 and stay in place until the United States lifts its own measures, Freeland said, hours after the United States said it would impose tariffs on aluminum and steel imports from Canada, Mexico and the European Union.

“The American administration has made a decision today that we deplore, and obviously is going to lead to retaliatory measures, as it must,” Prime Minister Justin Trudeau said at a news conference with Freeland.

Freeland also said Canada would challenge the US tariffs under both NAFTA’s Chapter 20 and the WTO’s dispute settlement process, and would work with other WTO members.

Mexico

Mexico announced what it described as “equivalent” measures on a wide range of US farm and industrial products.

The measures, which target pork legs, apples, grapes and cheese as well as steel and other products, will be in place until the US government eliminates its tariffs, Mexico’s Economy Ministry said.

The S&P 500’s packaged foods and meats industry sub-index fell two percent, with shares of meat producer Tyson Foods Inc falling four percent, Campbell Soup Co 2.5 percent and spice maker McCormick & Co Inc three percent.

The Mexican peso dropped about one percent and the Canadian dollar shed about 0.6 percent. At its low, the peso was at its weakest against the dollar in nearly 15 months.

The European Union

Reuters Photo

The EU threatened tariffs on Harley Davidson motorcycles and bourbon, measures aimed at the political bases of US Republican legislators. Shares of Harley-Davidson Inc fell 2.17 percent and Brown-Forman Corp, maker of Early Times and other bourbon brands, lost 2.1 percent.

EU members have given broad support to a European Commission plan to set duties on 2.8 billion euros (3.4 billion US dollars) of US exports if Washington ends tariff exemptions. EU exports potentially subject to US duties are worth 6.4 billion euros (7.5 billion US dollars).

European Commission President Jean-Claude Juncker said it's a bad day for world trade.

The "US leaves us no choice but to proceed with a WTO dispute settlement case and the imposition of additional duties on a number of US imports. We will defend the EU’s interests, in full compliance with international trade law."

"It’s entirely up to US authorities whether they want to enter into a trade conflict with their biggest partner, Europe," France’s Finance Minister Bruno Le Maire said after meeting with Ross on Thursday.

‘Significant threat’

The tariffs are part of Trump’s effort to protect US industry and workers from what he described as unfair international competition, a key theme of his “America First” agenda.

Temporary exemptions were granted to a number of nations and permanent ones to several countries including Australia, Argentina and South Korea. US trading partners had demanded that the exemptions be extended or made permanent.

The tariffs are aimed at allowing the US steel and aluminum industries to increase their capacity utilization rates above 80 percent for the first time in years.

Shares of US Steel Corp rose 1.7 percent, but AK Steel fell 1.3 percent and Steel Dynamics Inc shed 0.9 percent. Shares of Century Aluminum Co jumped 3.3 percent but Alcoa Corp shed 0.9 percent.

Source(s): Reuters