Donald Trump Expands Idiotic Trade War, Takes Aim At America’s Allies

President Trump is setting off another trade war, this time with some of America's closest and most important allies.

The White House announced today that the Administration will be expanding the aluminum and steel tariffs that the President announced in March on American allies in Europe, Canada, and Mexico, revoking an exemption that had been put in place when the tariffs were first announced:

WASHINGTON — The Trump administration said on Thursday that it would impose tariffs on metals imported from its closest allies, a measure certain to strain diplomatic relationships and provoke retaliation against businesses and consumers in the United States.

Tariffs of 25 percent on steel and 10 percent on aluminum from the European Union, Canada and Mexico, which together supply nearly half of America’s imported metal, are to take effect at midnight Thursday, Wilbur Ross, the commerce secretary, said on a call with reporters.

The move follows months of uncertainty during which the Trump administration dangled potential exemptions to to the tariffs in return for concessions on other fronts, including voluntary limits on metal shipments to the United States and reduced tariffs on imports from America.

In trying to create leverage by keeping its trading partners guessing, the administration sowed an atmosphere of chaos among allies as well as manufacturers uncertain about the ultimate impact on their vast supply chains.

After the metal tariffs were first announced in March, the countries targeted on Thursday secured temporary exemptions while the administration continued to negotiate with Canada and Mexico over the North American Free Trade Agreement and with European officials over other trade-related matters.

But Mr. Ross said on Thursday that, although the discussions with the Europeans had continued, there had not been enough progress to warrant either another temporary exemption or a permanent exemption.

The tariffs are meant to make good on President Trump’s promises to protect American industry. But they have prompted a fierce response from United States allies that have already prepared lists of American products they plan to target with tariffs.

American businesses that use steel and aluminum have also objected, as their costs rise and their overseas sources of materials dwindle. The move has even provoked criticism from some corners of the steel and aluminum industries, which are closely integrated with their Canadian counterparts and had fought for an exemption for Canada.

The Aluminum Association, which represents most of the aluminum producers in the United States, said on Thursday that it was “disappointed” by the announcement. Heidi Brock, the association’s president, said the move would do little to address the larger issue of overcapacity in China “while potentially alienating allies and disrupting supply chains that more than 97 percent of U.S. aluminum industry jobs rely upon.”

These particular tariffs have been justified by the Administration under Federal laws that grant the President the legal authority to impose tariffs when it is deemed necessary to protect American national security. Generally speaking, these laws were adopted with the idea in mind that it is important from a national security point of view to make sure that the industrial base that allows the United States to manufacture military equipment such as tanks, armored vehicle, and weapons without having to rely upon foreign sources that could be cut off in a time of international conflict. Essentially, the Trump Administration has argued, without providing much evidence, that the industrial base of the United States has been weakened by the fact that less expensive aluminum and steel is being imported into the United States. Authorities in the European Union and Canada, which are both significant sources of much of the imported aluminum and steel that comes into the United States, citing both their close alliance with the United States and existing defense agreements. Yesterday, as it became clearer that the previously granted exemption would not be extended, Canadian Foreign Minister Chrystia Freedland called the argument that Canadian steel and aluminum is somehow a threat to American national security “frankly absurd.”

Not surprisingly, the nations impacted by the new tariffs are not reacting positively, and are announcing retaliatory tariffs of their own:

PARIS — Some of the United States’s closest allies are baffled and frustrated by President Trump’s decision to impose steep tariffs on U.S. imports of their steel and aluminum, and officials in the European Union, Canada and Mexico are calibrating how hard to hit back.

“The E.U. believes these unilateral US tariffs are unjustified and at odds with World Trade Organisation rules,” Jean-Claude Juncker, head of the European Commission, said Thursday. “This is protectionism, pure and simple.”

Juncker said the E.U. will introduce a settlement dispute at the World Trade Organization and announce “counterbalancing measures.”

The E.U. had previously released a 10-page list of American products that would be potential targets of retaliation, including bourbon, a specialty of Senate Majority Leader Mitch McConnell’s home state of Kentucky; cranberries, which are grown in House Speaker Paul D. Ryan’s native Wisconsin; and orange juice, which would hit key swing state of Florida.

The European Commission on Thursday said an announcement on countermeasures would come Friday.

President Trump announed the tariffs in March, but had temporarily exempted Canada and Mexico while they were negotiating the North American Free Trade Agreement, and the E.U. while the United States sought to win certain concessions from Brussels, including the E.U. agreeing to a quota limiting European steel exports to the U.S. and a 10 percent decrease to current European tariffs on cars.

But the E.U. refused, repeatedly insisting that it must be permanently exempted from the new tariffs before any further negotiations could take place.

“Today is a bad day for world trade,” E.U. trade chief Cecila Malmstrom said after Thursday’s announcement that the tariffs would finally take effect. “We did everything to avoid this outcome.”

“Throughout these talks, the US has sought to use the threat of trade restrictions as leverage to obtain concessions from the EU,” Malmstrom continued in a statement. “This is not the way we do business, and certainly not between longstanding partners, friends and allies.”

There has been some division within Europe about how to respond.

France, in particular, has been an outspoken advocate for strong, unified pushback.

“Our U.S. friends must know that if they were to take aggressive actions against Europe, Europe would not be without reaction,” French Finance Minister Bruno Le Maire said Thursday, after unsuccessful meetings with U.S. Commerce Secretary Wilbur Ross in Paris.

President Emmanuel Macron has couched Trump’s tariffs as a “nationalist retrenchment” reminiscent of Europe in the 1930s.

But Germany, Europe’s largest economy, has sought to be a peacemaker in the negotiations, downplaying talk of retaliation and seeking to keep both sides talking.

Germany has perhaps the most to lose among E.U. nations if the spat escalates into a full-blown trade war.

The metal tariffs on their own won’t have much effect on the heavily export-driven German economy. Although Germany is the eighth largest source of steel imports for the United States, the U.S. market amounts to a low single-digit percentage of the overall German steel industry.

But German politicians and industry groups have said they are concerned that tit-for-tat measures could end in damaging tariffs on German automobiles, an outcome that Trump has repeatedly threatened. The administration earlier in May opened a trade investigation into vehicle imports, with the possibility it will end in tariffs on foreign cars justified by the same “national security” provision used to implement the metals tariffs.

Dieter Kempf, president of the Federation of German Industries, said in an interview aired Thursday by public broadcaster Deutschlandfunk that he predicts a “trade spiral” as a result of the tariffs. Both Europe and the United States, he said, would suffer the consequences.

“We’re anticipating that the U.S. president will follow up with further measures, and that’s what primarily worries us,” Kempf said.

Mexico has also announced that it will be imposing retaliatory tariffs on American products:

The government of Mexico announced on Thursday it would implement new duties on various U.S. products in response to President Trump’s decision to levy steel and aluminum tariffs on the country.

“Mexico reiterates its position against protectionist measures that affect and distort international commerce in goods,” the government said in a statement.

“In response to the tariffs imposed by the United States, Mexico will impose equivalent measures to various products like flat steels (hot and cold foil, including coated and various tubes), lamps, legs and shoulders of pork, sausages and food preparations, apples, grapes, blueberries, various cheeses, among others, up to an amount comparable to the level of affectation.”

(…)

Mexico, one of the top exporters of steel to the U.S., said in its Thursday statement that the tariffs “are neither adequate nor justified.” The country is currently participating in negotiations with the U.S. to reform the North American Free Trade Agreement (NAFTA).

Trump had previously threatened to scrap a new NAFTA agreement if Mexico didn’t do more to enforce security at its northern border to prevent migrants from entering the U.S. The Mexican government issued a response saying it was “unacceptable” to use immigration as a precondition for trade.

(…)

Mexico said its countermeasures would remain in place until the U.S. removes the tariffs.

“Mexico reiterates its openness to constructive dialogue with the United States, its support for the international system of commerce, and its rejection to unilateral protectionist measures,” the country said in its statement.

Tonda MacCharles at the Toronto Star, meanwhile, reports that the Canadian government is readying its own response:

OTTAWA—The Canadian government is preparing options including trade retaliation against the United States as high-level talks to resolve a NAFTA logjam and a looming American threat of tariffs against Canadian steel and aluminum imports stall, the Star has learned.

Publicly, the Canadian government is stopping short of an outright threat of trade retaliation in the face of Friday’s deadline when Canada’s exemption from import tariffs — 25 per cent on steel, 10 per cent on aluminum — expires.

Behind the scenes, the Canadian government is preparing “a whole series of options that we can pursue if they do that” which “of course” includes trade retaliation, a senior government official told The Star. “Retaliation is one of our options.”

But the official suggested the U.S. government has exempted Canada from trade tariffs at the last minute before, and might well do so again.

Prime Minister Justin Trudeau spoke to U.S. Vice-President Mike Pence Tuesday, and Foreign Affairs Minister Chrystia Freeland cut short a two-day trip to the U.S. capital, returning to Ottawa Wednesday morning with chief Canadian trade negotiator Steve Verheul after a two-hour meeting with U.S. Trade Representative Robert Lighthizer.

However Trudeau reported no advances or concessions on the U.S. side.

(…)

“Nobody wins in a trade war,” said Liberal MP Wayne Easter, chair of the Commons finance committee and co-chair of the Canada-U.S. Interparliamentary Group. “But the government is considering its options and we will exercise some of those options should this happen, you can be assured of that.”

Easter said tariffs could target “endless products because there’s endless trade. One of the areas the U.S. is certainly most vulnerable is their farm sector. And you know who won all those states in the last election?”

Farm state support was crucial to Trump’s election in 2016.
New Democrat Brian Masse, MP for Windsor-West and a member of the cross-border interparliamentary association, said trade retaliation is risky

This move follows in the footsteps of other provocative trade actions that the Trump Administration has taken in the past several months. In April, and on top of the previously announced tariffs on aluminum and steel, the President announced a series of new tariffs on goods manufactured in China. Among the products impacted by that were flat-screen televisions, medical devices, aircraft parts and batteries, but in the end, there were more than 1,300 different categories of imported goods that would fall within the new duties that the President announced. Within hours after those tariffs were made public, the Chinese announced a series of tariffs of their own that were directed primarily at the American agriculture industry, a move that was arguably made in no small part due to the fact that the Farm Belt went almost unanimously for Trump in the 2016 election. The Chinese tariffs also impacted American cars, chemicals, and other goods. The primary response to all of this tit-for-tat tariff leveling has, predictably, been instability on Wall Street and fears worldwide that we could be headed for a trade war that would be disastrous for all concerned.

Purely from the perspective of basic economics, the extent to which this is an exceedingly bad idea should be blindingly obvious. The only thing that tariffs accomplish is to increase the costs of imported good which will mean higher costs for businesses that rely on any raw materials that are impacted by the tariffs and, ultimately, higher prices for the businesses and consumers that purchase products made from the raw materials in question. Additionally, when tariffs like this are imposed it is seldom the case that domestic manufacturers step in and try to undercut the foreign competition with lower prices. Instead, they tend to increase their own prices so they can benefit from an increase in worldwide prices. This is especially true in this case since, in many cases, the price for these types of goods are determined on international commodity markets rather than being set by individual manufacturers. In other words, tariffs like these are a convenient excuse for these companies to increase their own prices to match the new level set by virtue of the tariff, or perhaps just slightly below it in order to attract customers. In that sense, these tariffs are little more than an indirect subsidy to the American steel and aluminum industry that will no doubt lead them to become enthusiastic fans of the President of the United States. After all, why wouldn’t you become a fan of a guy who makes it harder for people to compete against you while simultaneously allowing you to increase your own prices? For the rest of us, this means that the tariffs will cause prices to go up for everyone regardless of where they purchase their aluminum and steel from.

 

FILED UNDER: Donald Trump, Economics and Business, International Trade, Politicians, US Politics, , , ,
Doug Mataconis
About Doug Mataconis
Doug holds a B.A. in Political Science from Rutgers University and J.D. from George Mason University School of Law. He joined the staff of OTB in May 2010. Before joining OTB, he wrote at Below The BeltwayThe Liberty Papers, and United Liberty Follow Doug on Twitter | Facebook

Comments

  1. Daryl and his brother Darryl says:

    Well now…isn’t that a nice tax that he just levied on us all.
    I’m old enough to remember when Republicans believed in free trade.

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  2. OzarkHillbilly says:

    With a friend like trump, who wouldn’t look to China?

    Make America Irrelevant Again.

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  3. gVOR08 says:

    As with all things Trump, let’s not panic til we see if this proposal makes it to next week.

    The most complicated thing Trumpsky has ever known is New York real estate. He can’t begin to comprehend, say, the global supply chain behind the auto industry.

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  4. CSK says:

    @Daryl and his brother Darryl:

    Trump doesn’t understand free trade. He doesn’t understand anything about economics. And you can’t explain it to him, because he won’t listen, and even if he did, he’s too stupid to get it.

    It’s like when he asked “the generals” three times why nuclear weapons couldn’t be used against ISIS. They told him, but he didn’t want to hear it.

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  5. Kathy says:

    The other thing is that the economy is highly globalized now. Look at complex products like cars, planes, machinery, electronics, etc. and you’ll find all the major manufacturers have suppliers of parts as well as raw materials all over the world.

    This means price increases for commodities in any country can raise the price of manufactured products in other countries as well.

    Add the slowly rising price of oil, always a major concern, and what you see is Chetto Benito busily manufacturing a global recession.

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  6. Modulo Myself says:

    The jobs ain’t coming back and no trade war is going to happen. If you wish to make the ‘economy’ better you have to work hard at it, and expand your worldview rather than reduce it to that of a person stuck in 1958. It’s like with immigration–the Americans who hate immigrants can’t even imagine trying to make Mexico and Central America better places to live in order to reduce immigration. They just like to hate immigrants and watch Fox.

    Long-term thinking about the economy requires thinking about infrastructure, climate change, inequality, health care, and basic happiness. There’s no war to be fought. This is common sense, but it threatens the people who voted for and run money through the Trump laundromat.

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  7. Moosebreath says:

    @Daryl and his brother Darryl:

    “I’m old enough to remember when Republicans believed in free trade.”

    I’m old enough (and then some) to remember when Obama cozies up to our enemies and insults our allies was a thing.

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  8. teve tory says:

    Well now…isn’t that a nice tax that he just levied on us all.
    I’m old enough to remember when Republicans believed in free trade.

    If you were even older, you’d remember when they were fiscally responsible. But you’d have to go back to like Eisenhower.

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  9. Franklin says:

    So Canada is manipulating currency, too? None of this makes any sense unless you consider the possibility that some American steel manufacturer is financially assisting the Trump family in some manner.

    And also, as I’ve said a million times, we *want* steel and aluminum. If you’re going to do tariffs, do it on plastic crap that is ecologically bad and causes various health problems. Or on lead. We don’t need any lead, thanks.

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  10. Daryl and his brother Darryl says:

    Trudeau is some kind of po’ed…and has promised dollar-for-dollar retaliation.

    We will continue to make arguments based on logic and common sense and hope that eventually they will prevail against an administration that doesn’t always align itself around those principles

    Trudeau called the Trump administration’s national security argument “inconceivable” and called the tariffs “an affront to the Canadians who died” alongside Americans in battle.

    Canada’s Foreign Affairs Minister Chrystia Freeland:

    This is the strongest trade action Canada has taken in the post-war era. This is a very strong response, it is a proportionate response, it is perfectly reciprocal…this is a very strong Canadian action in response to a very bad U.S. decision

    Manifest incompetence in the White House…but they did pardon a racist felon today, on the heels of Sheriff Arpaio…so there is that.

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  11. MBunge says:

    So, you’ve posted about Roseanne and gone on a binge about Trump. Is there something coming about Samantha Bee and Ivanka Trump or does your brain just drop that into the Voldemort “Must Not Be Named” file?

    Mike

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  12. Daryl and his brother Darryl says:

    @MBunge:

    Is there something coming about Samantha Bee and Ivanka Trump

    Before you run away, coward, did Samantha Bee say something racist?
    Frankly, the way you comment and run…never willing to back up your nonsense, makes you a feckless c*nt, too.

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  13. wr says:

    @MBunge: Whataboutwhataboutwhataboutwhataboutwhataboutwhataboutwhataboutwhatabout.

    There. Saved you from wasting your time with your next few messages.

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  14. Guarneri says:

    I do have to confess. It is amusing to come around here and see Trump living rent free in so, so many heads.

    There are therapists who can help those not in denial, though.

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  15. inhumans99 says:

    @MBunge:

    MBunge, you are one strange dude (dudette?). What point are you trying to make with your squirrel! post?

    We get it…racists taking over the GOP is cool beans with you, but enough of this thread tangent, do you have anything to say about the tariffs or you just wanted to come to this thread to provide a daily reminder that you heart Trump?

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  16. Daryl and his brother Darryl says:

    @Guarneri:

    see Trump living rent free

    It’s comical to see someone like you, who has compromised his principles on almost everything to accommodate Dennison, criticizing anyone.

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  17. An Interested Party says:

    It is amusing to come around here and see Trump living rent free in so, so many heads.

    Hmm…it really is shocking to see people commenting about the Orange Blob on a post about the Orange Blob…perhaps they should comment about alleged phony Masters of the Universe instead…

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  18. Andre Kenji de Sousa says:

    @Franklin:

    None of this makes any sense unless you consider the possibility that some American steel manufacturer is financially assisting the Trump family in some manner.

    Unfortunately it makes sense. Both Trump and his base have very little understanding about the the world, and they really seem to think that the United States is the only country in the world. This idea of protectionism is not uncommon in the Republican base.

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  19. Lit3Bolt says:

    @MBunge:

    I love your self-immolations to trigger the libs. You’re adorable. Never change, as you descend into dementia, which is the main voting block for people like you these days.

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  20. Franklin says:

    @Guarneri: Didn’t you try to be mildly thoughtful in the past? If you can try to dredge up the old you, can you possibly share what might be beneficial about starting a trade war with Canada, for example? I haven’t seen anyone seriously defend it.

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  21. Guarneri says:

    @Franklin:

    I confess I modulate my comments to the various levels I see here. As such, the worst of the sewer is just fine…..

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  22. CSK says:

    @MBunge:

    What did Bee do that Trump hasn’t–more than once? Trump has called Sally Yates a c*nt. He called Jennifer Lin a c*nt. He called Jessica Leeds a c*nt. He’s also frequently referred to women as slobs, pigs, and dogs.

    Oh, and by the way, Trump was the individual who happily gave Howard Stern permission to refer to Ivanka as a piece of ass.

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