Business

White House to Impose Tariffs on Steel and Aluminum From Key U.S. Allies, Risking Retaliation

Posted May 31, 2018 5:59 p.m. EDT
Updated May 31, 2018 6:00 p.m. EDT

WASHINGTON — The Trump administration said Thursday it would impose tariffs on metals imported from its closest allies, a move sure to provoke retaliation against businesses and consumers in the United States and to further strain diplomatic ties tested by President Donald Trump’s combative approach.

Tariffs of 25 percent on steel and 10 percent on aluminum from the European Union, Canada and Mexico, which together supply nearly half of the United States’ imported metal, are to take effect at midnight Thursday, said Commerce Secretary Wilbur Ross.

Officials in Europe, Canada and Mexico responded quickly, denouncing the tariffs and warning of retaliation measures, some aimed at goods like pork, steel, bluejeans, bourbon and cheese from the parts of the United States where Trump enjoys his strongest political support.

“These tariffs are totally unacceptable,” Prime Minister Justin Trudeau of Canada said in a statement.

“That Canada could be considered a national security threat to the United States is inconceivable,” he added. “These tariffs will harm industry and workers on both sides of the Canada-U.S. border, disrupting linked supply chains that have made North American steel and aluminum more competitive around the world.”

The move follows months of uncertainty during which the Trump administration dangled potential exemptions 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 the United States.

In trying to create leverage in trade negotiations by keeping its trading partners guessing, the administration sowed an atmosphere of chaos among allies as well as manufacturers uncertain about the ultimate effect on their vast supply chains. And on Thursday, the Trump administration said it hoped to continue to negotiate with the affected countries, creating further confusion among business owners and foreign leaders.

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.

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

The tariffs are meant to fulfill Trump’s promises to defend U.S. industry. But they have prompted a fierce response from U.S. allies that argue that the measures violate international trading agreements.

European officials are preparing to impose retaliatory levies on an estimated $3 billion of imported U.S. products later in June. In a joint statement, France’s foreign affairs and economy ministers and Germany’s economy minister said the two countries would coordinate their response.

Mexico announced retaliatory tariffs of its own Thursday, targeting imports from the United States that included flat steel, lamps, pork products and prepared meat products, apples, grapes, cranberries and cheeses — goods chosen for maximum impact in areas that have supported Trump.

Combined with similar measures being prepared by China, Russia and Turkey, the effect of the penalties on U.S. goods was expected to be severe.

Jean-Claude Juncker, president of the European Commission, called the tariffs announced by the White House on Thursday “protectionism, pure and simple.” Juncker added that the United States had left Europe no choice but to proceed with a case at the World Trade Organization and its own tariffs on U.S. products.

Some companies in the United States commended the move.

Century Aluminum, which has supported the tariffs, said the action “protects thousands of American aluminum workers and puts U.S. national security first.”

But many other businesses have objected, including construction companies and manufacturers that rely on steel and aluminum to make other products. The tariffs have raised the price of doing business for such companies, and have added uncertainty about the price and availability of the metals in the future.

The Federal Reserve’s latest Beige Book, a collection of anecdotes about the health of regional economies that was released Wednesday, contains more than two dozen references to business fears that the administration’s trade policies, and the steel and aluminum tariffs in particular, would hurt sales and profits.

Heidi Brock, president of the Aluminum Association, which represents most of the aluminum producers in the United States, said Thursday that the group was “disappointed” by the announcement. She said the tariffs 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.”

U.S. farm groups also took issue with the move. Brian Kuehl, executive director of Farmers for Free Trade, said the announcement “opens the floodgates to billions in new tariffs on American agriculture” from Canada, Mexico, China, India and Europe.

Sen. Ben Sasse, R-Neb., called the tariffs “dumb” and said they harkened back to the Great Depression.

“Europe, Canada and Mexico are not China, and you don’t treat allies the same way you treat opponents,” Sasse said.

National Security Argument

The tariffs are being imposed under a legal measure related to protecting U.S. national security. The Trump administration has argued that imports have weakened the country’s industrial base, and, by extension, its ability to produce tanks, weapons and armored vehicles.

Ross defended the principle Thursday. “We take the view that without a strong economy, you can’t have strong national security,” he said.

The European Union and Canada have objected strongly to the national security argument, citing their close alliance and defense agreements with the United States, and they have pledged to challenge the rationale at the World Trade Organization. Last week, the Trump administration cited national security when it said it was starting a similar investigation into imported cars, expanding its campaign to a market many times larger than the steel and aluminum industry. The vast majority of vehicles imported into the United States come from Canada, Mexico, the European Union, South Korea and Japan.

“Our view of this one-sided move by the Americans is that it violates the law,” said Heiko Maas, Germany’s foreign minister. “We view the argument of protecting U.S. security as grounds for levying tariffs on steel and aluminum — and to consider doing so on automobile imports — to be inapplicable.”

Europe and other members of the European Union would respond accordingly, he added.

“We have always made clear to the Americans that we have no interest in a trade war between the EU and the USA,” he said.

The tariffs took effect globally in late March, lifting the price on metals imported from countries like Russia, Japan, China and Turkey. The same month, the administration said it had secured a trade deal with South Korea under which the country would restrain its metal shipments. The Trump administration has also reached deals with Brazil, Australia and Argentina under which those countries agreed to restrain their metals shipments.

Leaders in Canada, Mexico and Europe had secured temporary exemptions, and they remained hopeful that their countries’ traditional alliances with the United States and continuing trade discussions with the Trump administration would grant them a reprieve.

While Ross insisted Thursday that any issues related to Mexico and Canada were purely based on national security concerns, Trump had previously tied the possibility of tariff exemptions for Canada and Mexico to the progress over talks for NAFTA. Those talks have stalled in recent weeks amid significant differences over matters like the rules governing automobile manufacturing in North America.

Jean Simard, president of the Aluminum Association of Canada, said his industry was being hit with tariffs as a pressure tactic in the NAFTA negotiations. He urged Canada to break off those talks.

“We’re just a piece in a larger chess game,” Simard said. “The Canadian government has always been very clear that we will not negotiate with a knife to our throat.”

European officials had also tried maneuvering to avoid a tit-for-tat trade war with the United States — something they view as unproductive, economically perilous and detrimental to the increasingly fraught relationship between the longtime allies.

Germany in particular had pressed for a negotiated solution, but officials there grew wary after Trump’s announcement last week about the investigation into automotive imports.

France’s finance minister, Bruno Le Maire, warned that the U.S. tariffs on European metals would be dangerous and unjustified.

“It’s entirely up to U.S. authorities whether they want to enter into a trade conflict with their biggest partner, Europe,” he said Thursday after meeting with Ross.

“Global trade is not a gunfight at the OK Corral,” Le Maire added. “It’s not about who attacks whom, and then wait and see who is still standing at the end.”