The Trump administration will levy hefty steel and aluminum tariffs on the European Union, Canada and Mexico starting on Friday, a move that brought threats of retaliation from the major trading partners.
Commerce Secretary Wilbur Ross said that President Trump had decided on Thursday morning to end the temporary exemptions for the three key trading allies despite their two months of lobbying to avoid the tariffs, raising tensions among the economic partners.
“We look forward to continued negotiations with Canada and Mexico on one hand and with the European Commission on the other hand as there are other issues we need to get resolved,” Ross told reporters on a conference call.
Mexico and the EU were swift in saying they would follow through on their promises to impose retaliatory tariffs on U.S. exports.
In a statement, the EU referred to a 10-page list of possible targets they produced in March after Trump first announced the potential tariffs. The EU had vowed to levy tariffs of $3.3 billion on iconic American products such as Kentucky bourbon, jeans and Harley-Davidson motorcycles.
European leaders also said they would proceed with a complaint at the World Trade Organization (WTO).
“We did everything to avoid this outcome,” said EU Commissioner for Trade Cecilia Malmström, who called it “a bad day for world trade.”
“This is protectionism, pure and simple,” said Jean-Claude Juncker, president of the European Commission.
Canada and Mexico have said the tariffs are unacceptable and that imports of steel and aluminum don’t affect U.S. national security. They warned the tariffs could put the fate of the North American Free Trade Agreement (NAFTA) at stake.
Mexico said Thursday that it would impose tariffs on a wide range of U.S. products including steels such as hot and cold foil, lamps, legs and shoulders of pork, sausages, apples, grapes, blueberries and various cheeses in response to the tariffs.
“Mexico deeply regrets and condemns the decision of the United States to impose these tariffs on imports of steel and aluminum from Mexico from June 1, at the discretion of national security,” Mexico’s government said in a statement.
Nearly 50 percent of U.S. steel and aluminum imports in 2017 came from the EU, Canada and Mexico.
Ross dismissed suggestions that the U.S. is igniting a trade war with key allies while saying the effects on the U.S. economy will be “trivial.”
“As you know, this has been under discussion for quite a long time and it’s a very small percentage of the respective economy. A fraction of 1 percent,” Ross told CNBC’s “Squawk on the Street” during an interview from Paris.
But the U.S. Chamber of Commerce said that U.S. steel prices have risen 40 percent since Jan. 1 and are now nearly 50 percent higher than in Europe or China.
A number of Republicans on Capitol Hill blasted the decision.
“Europe, Canada, and Mexico are not China, and you don’t treat allies the same way you treat opponents,” said Sen. Sen. Ben Sasse (R-Neb.), who called the decision “dumb.”
Senate Finance Committee Chairman Orrin Hatch (R-Utah), whose committee oversees trade, said that “tariffs on steel and aluminum imports are a tax hike on Americans and will have damaging consequences for consumers, manufacturers and workers.”
One GOP senator said that several Republican lawmakers said they had no warning about the tariffs outside of Trump’s statements that the exemptions were going to end for the key allies.
The tariffs on aluminum and steel are just one plank in an aggressive effort by Trump to reshape the nation’s trade policies that has rattled allies, markets and U.S. businesses.
Trump has also threatened to impose tariffs on imported automobiles and is battling with China on a range of proposed restrictions,
Ross repeated remarks he made on Wednesday in Paris during a meeting of the Organisation for Economic Co-operation and Development (OECD) that just because the United States has levied the tariffs doesn’t mean that negotiations with the countries are halted even if they retaliate.
“If any of these parties retaliate that does not mean that there can’t be continuing negotiations,” Ross told reporters.
“Take the example of China: The tariffs that we’ve imposed went into effect on China on the 23rd of March and, as you’re well aware, we have continued to have trade negotiations with China,” he said.
“So, the fact that we took the tariff action doesn’t mean that there cannot be negotiation,” he said.
The U.S. had delayed imposing the tariffs on Canada and Mexico pending talks on NAFTA and related national security issues, Ross said.
“Those talks are taking longer than we’d hoped. There is no longer a precise date when they may be concluded, so they were added into list of those who will bear tariffs,” he said.
Discussions with the EU made some progress but didn’t get to the point where it was warranted to give the bloc a continued temporary exemption or a permanent exemption, Ross said.
South Korea had previously reached a deal with the Trump administration for an exemption. Argentina, Brazil and Australia have reached agreements that will exempt them from the tariffs for now.
The United States negotiated voluntary export limits with several other friendly nations, including South Korea, Argentina, Australia and Brazil.
Ross said that Trump can “do anything he wishes at any point subsequent from today” on whether to impose tariffs and quotes.
“There is potential flexibility going forward,” Ross said.
The Section 232 law, which is rarely used, allows tariffs to be placed on imports in the name of national security. Trump is considering the same law to employ tariffs on automobiles.
Ross said that he still plans to leave for China on Friday to continue trade talks there.
BY VICKI NEEDHAM – 05/31/18