The following article by David J. Lynch, Josh Dawsey and Damian Paletta was posted on the Washington Post website May 31, 2018:
Trump’s announcement of a 25 percent tariff on steel imports could greatly affect products that you may not know depend on it, like Reddi-wip. (Jhaan Elker/The Washington Post)
President Trump on Thursday imposed tariffs on imported steel and aluminum from the European Union, Canada and Mexico, triggering immediate retaliation from U.S. allies and protests fromAmerican businesses and farmers.
The tariffs — 25 percent on steel and 10 percent on aluminum — take effect at midnight Thursday, marking a major escalation of the trade war between the United States and its top trading partners.
Stung by the U.S. action, the allies quickly hit back. The E.U. said it would impose import taxes on politically sensitive items like bourbon from Senate Majority Leader Mitch McConnell’s home state of Kentucky. Mexico said it would levy tariffs on American farm products, while Canada zeroed in on the same metals that Trump had targeted.
Capping the extraordinary day, Canadian Prime Minister Justin Trudeau revealed that he had rejected an ultimatum from Vice President Pence that any new North American trade deal be renewed at five-year intervals.
“Today is a day when the Trump administration pretty much signaled it is throwing out the rule book on trade,” said Rufus Yerxa, head of the National Foreign Trade Council and a former U.S. negotiator. “I’ve been dealing with this stuff for four decades and I’ve never seen anything like this.”
After 17 months in the White House, Trump’s “America First” program has landed the United States in increasingly bitter standoffs with customers and suppliers that account for nearly two-thirds of the nation’s $3.9 trillion annual merchandise trade.
Businesses granted government protection, such as the steel industry, have added jobs at blast furnaces in Illinois and mills in Ohio. But chemical manufacturers, brewers, footwear makers and auto companies have warned that Trump’s tariffs will cost several jobs elsewhere in the economy for each job saved or created in a metals producer.
Thursday’s action was driven by the president’s conviction that allies and adversaries routinely take advantage of the United States and that efforts to resolve trade disputes are doomed unless he wields a big tariff stick.
“The United States has been taken advantage of for many decades on trade,” Trump said in a statement. “Those days are over. Earlier today, this message was conveyed to Prime Minister Justin Trudeau of Canada: The United State[s] will agree to a fair deal, or there will be no deal at all.”
Recent talks with the three U.S. trading partners made insufficient progress for Trump to resist his inclination to order new import taxes. “He is impatient. He wants to see action,” said one senior administration official, who spoke on the condition of anonymity to describe internal discussions.
To recover lost factories and manufacturing jobs, Trump has embraced tariffs with an enthusiasm not seen since the 19th century. The Commerce Department boasts that it has launched 78 percent more trade enforcement investigations than during the Obama administration. The president has levied tariffs on solar panels and washing machines, threatened to impose them on Chinese imports and foreign-made cars, and now treated some of America’s closest friends as economic enemies.
European Commission President Jean-Claude Juncker said May 31 the E.U. will take counter-measures after the United States opted not to exempt it from tariffs. (Reuters)
“It’s more than highly unusual. It’s unprecedented to have gone after so many U.S. allies and trading partners, alienating them and forcing them to retaliate,” said economist Douglas Irwin, author of a history of U.S. trade policy since 1763. “It’s hard to see how the U.S. is going to come out well from this whole exercise.”
White House advisers have warned the president that he risks damaging U.S. businesses, farmers and the stock market. “You say to him how bad it’s going to be, and he responds, ‘We’re already getting screwed. What are we supposed to do, sit here and beg for them to leave us alone?’” said one adviser, who spoke on the condition of anonymity to discuss internal deliberations.
In response to Thursday’s announcement, the E.U. said it will impose duties “on a number of imports from the United States,” referring to a 10-page list of targets for retaliation it published in March, which included bourbon and Harley-Davidson motorcycles. European leaders also vowed to proceed with a complaint to the World Trade Organization.
“This is protectionism, pure and simple,” said Jean-Claude Juncker, president of the European Commission.
The Mexican government said it would levy import taxes on U.S. exports of pork bellies, apples, cranberries, grapes, certain cheeses and various types of steel.
And Canada slapped a surtax on $12.8 billion of American steel, aluminum, coffee, candy, pizza and quiche, as Trudeau pronounced Trump’s claim to be protecting national security an “affront” to Canadians who fought alongside American GIs from World War II to Afghanistan.
The root of the current trade mess lies in a surplus of global steel, which most analysts blame on excess Chinese investment in production facilities. Steelmakers worldwide produce 700 million tons of steel more than customers need, or seven times total U.S. production, the Commerce Department says.
That flood of steel has depressed prices, making it difficult for many American steelmakers to compete.
Last year, Commerce Secretary Wilbur Ross negotiated voluntary reductions in global capacity. But Trump rejected the deal.
Trump had announced the tariffs in March but gave several U.S. allies temporary exemptions while they negotiated potential limits on shipments to the United States.
At the time, the nonpartisan Trade Partnership estimated that the tariffs would cost five jobs for every position saved in the steel and aluminum industries.
Ross said the president acted on national-security grounds, seeing a rising tide of imports as a threat to the domestic metals industry. “Without a strong economy, you can’t have a strong national security,” Ross said.
Officials from the three trading partners — among Washington’s closest allies for decades — have dismissed the idea that their shipments to American customers endanger the United States — and some prominent Republicans attacked the tariffs as wrongheaded.
“This is dumb. Europe, Canada and Mexico are not China, and you don’t treat allies the same way you treat opponents,” Sen. Ben Sasse (R-Neb.) said. “We’ve been down this road before — blanket protectionism is a big part of why America had a Great Depression. ‘Make America Great Again’ shouldn’t mean ‘Make America 1929 Again.’ ”
The United States negotiated voluntary export limits with several other friendly nations, including South Korea, Argentina, Australia and Brazil. Ross said that he intends to continue talks with European diplomats and officials from Canada and Mexico, but those are likely to be contentious.
“We continue to be quite willing, indeed eager, to have further discussions with all of these parties,” Ross told reporters, speaking from Paris, where he is attending meetings at the Organization for Economic Cooperation and Development.
The new tariffs will do nothing to improve prospects for a new North American trade deal.with Mexico and Canada. Trudeau said that he had offered to visit Washington to make a last-ditch bid for a deal that would have prevented the tariffs from taking effect.
But on Tuesday, Pence told him that Trudeau first had to agree that any new North American trade deal would lapse every five years unless formally renewed. The U.S. demand for such a “sunset clause” has long been unacceptable to its negotiating partners, so Trudeau refused.
“The chances of a NAFTA renegotiation were slim, and now they are slimmer because of this,” said Luis de la Calle, a former undersecretary at Mexico’s ministry of economy. “Successful negotiations require trust, and the question is whether we can trust the U.S. The answer appears to be no.”
Thursday’s action also is expected to complicate U.S. efforts to confront China over trade practices that the administration regards as unfair. The E.U. shares many of Washington’s concerns about China’s efforts to acquire advanced technology through compulsory licensing practices, cybertheft and other measures.
But European officials are increasingly irritated by Trump’s aggressive use of obscure provisions in U.S. trade laws against U.S. allies.
Liam Fox, the United Kingdom’s secretary of state for trade, told Sky News that the president’s invocation of national security to justify protection for metals producers was “patently absurd.”
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.
Even before Trump’s latest action, the U.S. enforced 169 anti-dumping or counter-subsidy tariffs on various steel products.
“Our members could face having to pay double tariffs on some materials necessary to manufacture parts in the US,” said a statement from the Motor & Equipment Manufacturers Association. “Industries like ours, which require long-term investments in facilities and employees, depend on regulatory and market stability. These actions have thrown all of that up in the air.”
Ross, meanwhile, said that he still plans to leave for China on Friday for the resumption of trade talks. Earlier this week, there were reports that the talks might be canceled following Trump’s renewed threat to impose import taxes on $50 billion in Chinese products.