Trump Slaps Steel Tariffs on EU, Canada, Mexico as Tensions Rise

Casey Dawson
May 31, 2018

The Wall Street Journal reported on Wednesday that Washington would allow the European Union exemption to expire, after weeks of talks failed to yield a compromise, such as a quota arrangement.

Steel and aluminum stocks surged initially, but pared gains.

The decision to impose tariffs came as a shock to Canada and Mexico, as both countries thought they would be spared from the levies because of earnest negotiations they have had with administration officials over NAFTA.

By increasing the cost of imported steel and aluminum, companies that rely on the metals will be forced to either accept the higher costs and lower profits or pass on the price increase to consumers. Likely targets are thought to be US exports of jeans, motorcycles and bourbon.

Secretary Ross made it clear thta restructuring tariffs on USA goods is a high priority for the Trump administration. "The UK and other European Union countries are close allies of the U.S. and should be permanently and fully exempted from the American measures on steel and aluminium", the United Kingdom said in a statement. U.S. Steel (X) rose 3.6%, Steel Dynamics (STLD) pulled back to a 0.6% gain.

German Chancellor Angela Merkel said the European Union would give a "smart, determined and jointly agreed" response to new US tariffs that she said would break World Trade Organization rules.

USA and European officials held last-ditch talks in Paris on Thursday to try to reach a deal, though hopes are low and fears of a trade war are mounting.

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The measures will be in place until the US government eliminates its tariffs, the ministry said.

"We are deeply disappointed that the USA has made a decision to apply tariffs to steel and aluminium imports from the European Union on national security grounds", a government spokesman said.

Trump imposed the steel and aluminum penalties under a 1962 law that gives the president broad power to increase or reduce tariffs on goods deemed critical to national security. "The government is absolutely prepared to and will defend Canadian industries and Canadian jobs".

The U.S. plan has raised the threat of retaliation from Europe and fears of a global trade war - a prospect that is already weighing on investor confidence and could hinder the global economic upturn.

Last week, Trump ordered the Commerce Department to conduct a national security investigation into foreign auto imports. But they can also increase costs more broadly for USA manufacturers who cannot source all their needs locally and have to import the materials.

German magazine Wirtschaftswoche reported on Thursday that Trump had told French President Emmanuel Macron he wanted to stick to his trade policy long enough that Mercedes-Benz cars were no longer cruising through NY. This Trump trade war threat tanked the stock market in late February and early March and got the Dow Jones off to a weak start Thursday.

"These solutions might bring symbolic satisfaction in the short term", Macron said. But German Economy Minister Peter Altmaier insisted the Europeans were ready to negotiate special trade arrangements, notably for liquefied natural gas and industrial goods, including cars.

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