November 13, 2018
National Politics Latest News | Poll Questions | Stan Lee | Ranked-Choice Voting | Election 2018

Trump tariffs on US allies draw retaliation threats

Patrick Doyle | AP
Patrick Doyle | AP
Canadian Prime Minister Justin Trudeau speaks during a news conference in Ottawa, Ontario on Thursday, May 31, 2018. The Trump administration announced Thursday that it will impose tariffs on steel and aluminum imports from Europe, Mexico and Canada. Trudeau said: "These tariffs are totally unacceptable." Canada announced plans to slap tariffs on $16.6-billion Canadian (US $12.8 billion) worth of U.S. products, ranging from steel to yogurt to toilet paper.

WASHINGTON — The Trump administration delivered a gut punch to America’s closest allies Thursday, imposing tariffs on steel and aluminum from Europe, Mexico and Canada in a move that drew immediate vows of retaliation.

Stock prices slumped amid fears of a trade war, with the Dow Jones industrial average falling nearly 252 points, or 1 percent, to 24,415.84.

The import duties threaten to drive up prices for American consumers and companies and are likely to heighten uncertainty for businesses and investors around the globe.

Commerce Secretary Wilbur Ross said the tariffs — 25 percent on imported steel, 10 percent on aluminum — would take effect Friday.

President Donald Trump had originally imposed the tariffs in March, saying a reliance on imported metals threatened national security. But he exempted Canada, Mexico and the European Union to buy time for negotiations — a reprieve set to expire at midnight Thursday.

Other countries, including Japan, America’s closest ally in Asia, are already paying the tariffs.

The administration’s actions drew fire from Europe, Canada and Mexico and promises to quickly retaliate against U.S. exports.

“This is protectionism, pure and simple,” said Jean-Claude Juncker, president of the European Commission.

The EU earlier threatened to counterpunch by targeting U.S. products, including Kentucky bourbon, blue jeans and motorcycles. David O’Sullivan, the EU’s ambassador in Washington, said the retaliation will probably be announced in late June.

Mexico complained that the tariffs will “distort international trade” and said it will penalize U.S. imports including pork, apples, grapes, cheeses and flat steel.

In Canada, Prime Minister Justin Trudeau said: “These tariffs are totally unacceptable.” Canada announced plans to slap tariffs on $12.8 billion worth of U.S. products, ranging from steel to yogurt and toilet paper.

“Canada is a secure supplier of aluminum and steel to the U.S. defense industry, putting aluminum in American planes and steel in American tanks,” Trudeau said. “That Canada could be considered a national security threat to the United States is inconceivable.”

Two items on the Canadian list that are dear to Mainers are maple syrup and maple sugar products. While the United States is the second-largest exporter of maple syrup in the world at $29.5 million in 2016, it was dwarfed by Canada, which exported $287.9 million worldwide, according to U.S. Department of Commerce figures.

Statistics for Maine exports of maple syrup to Canada were not readily available, but the product doesn’t rank in the Top 25 of Maine exports to Canada.

“The tariffs would not have a large impact on our industry, because I don’t think we are shipping a large amount of syrup into Canada,” said Lyle Merrifield, president of the Maine Maple Producers Association. He added that he doesn’t have exact export figures for Maine maple syrup to Canada, but thinks the number is low. He said he has heard that some sugar camps on the Golden Road, a private logging road in Somerset County, might be exporting to Canada.

Trump had campaigned for president on a promise to crack down on trading partners that he said exploited poorly negotiated trade agreements to run up big trade surpluses with the U.S.

The U.S. tariffs coincide with — and could complicate — the Trump administration’s separate fight over Beijing’s strong-arm tactics to overtake U.S. technological supremacy. Ross is leaving Friday for Beijing for talks aimed at preventing a trade war with China.

The world’s two biggest economies have threatened to impose tariffs on up to $200 billion worth of each other’s products.

The steel and aluminum tariffs could also complicate the administration’s efforts to renegotiate the North American Free Trade Agreement with Canada and Mexico, a pact that Trump has condemned as a job-killing “disaster.”

Trump offered the two U.S. neighbors a permanent exemption from the steel and aluminum tariffs if they agreed to U.S. demands on NAFTA. But the NAFTA talks stalled.

Ross said that there was “no longer a very precise date when they may be concluded,” and that as a result, Canada and Mexico were added to the list of countries hit with tariffs.

Likewise, the Trump trade team sought to use the tariff threat to pressure Europe into reducing barriers to U.S. products. But the two sides could not reach an agreement.

The import duties will give a boost to American makers of steel and aluminum by making foreign metals more expensive. But companies in the U.S. that use imported steel will face higher costs.

And the tariffs will allow domestic steel and aluminum producers to raise prices, squeezing companies — from automakers to can producers — that buy those metals.

Prices started rising even before all the tariffs kicked in. Stripmatic Products, an auto parts supplier in Cleveland, has seen a 40 percent increase in the price of steel. The higher cost meant it lost out this year to a Chinese company on a contract to branch out into a new market: making food-processing equipment.

“We were basically eliminated from contention,” said Stripmatic president Bill Adler. He said the company needed four or five years to recover the last time the U.S. imposed tariffs on steel, in 2002.

Measured purely in dollars, the tariffs don’t amount to much in America’s $20 trillion economy. Speaking on CNBC on Thursday, Ross called the tariffs “blips on the radar screen.”

But Oliver Rakau, an economist with Oxford Economics, warned that the tariffs could cause economic damage because “the specter of an escalation is likely to weigh on business sentiment and may derail the investment recovery.”

The Trump administration is turning to a little-used weapon in trade policy: Section 232 of the Trade Expansion Act of 1962. It empowers the president to restrict imports and impose unlimited tariffs if the Commerce Department sees a threat to national security.

Europe, Japan and other U.S. trading partners are contesting the U.S. tariffs at the World Trade Organization.

The WTO gives countries broad leeway to determine national security interests. But there was an unwritten agreement that WTO member countries would use the national-security justification sparingly to avoid abuses.

Now that Trump has broken the taboo, critics fear that other countries will impose sanctions.

Critics say the steel and aluminum tariffs would do little to address the real problem plaguing metals producers around the world: massive overproduction by China that has flooded world aluminum and steel markets. Canada, a staunch U.S. ally, is the largest supplier of steel and aluminum to the United States.

“The administration’s trade remedies should specifically target structural aluminum overcapacity in China, which is caused by rampant, illegal government subsidies,” said Heidi Brock, president of the Aluminum Association, which represents aluminum producers, fabricators, recyclers and suppliers.

Ross said negotiations with Mexico, Canada and the EU can continue even once the tariffs are in place.

But Philip Levy, senior fellow at the Chicago Council on Global Affairs and a former White House trade adviser, said: “I don’t think this is prelude to a series of deals. If anything, this kills the possibility of deals.”

If the U.S. can impose tariffs any time it declares imports a threat to national security, Levy asked, “Why would anyone want to negotiate with us?”

Associated Press writers Martin Crutsinger, Christopher Rugaber, Marcy Gordon, Jill Colvin, Kevin Freking, Angela Charlton, Alex Turnbull, Lorne Cook, Raf Casert, Christopher Sherman, Rob Gillies and Barry Hatton contributed to this report.

Follow the Bangor Daily News on Facebook for the latest Maine news.

 


Have feedback? Want to know more? Send us ideas for follow-up stories.

You may also like