US allies come together to fight Trump's tariffs plan, warn of trade war

Washington: Countries around the world fought back on Friday against President Donald Trump’s decision to slap tariffs on steel and aluminium imports, announcing retaliatory countermeasures and warning that the US plan will hurt US consumers.

French President Emmanuel Macron said in a statement on Friday that he told Trump in a phone call that the new US tariffs on European, Mexican and Canadian goods are illegal and a “mistake.” Macron pledged the riposte would be “firm” and “proportionate” and in line with World Trade Organization (WTO) rules.

Germany’s Volkswagen, Europe’s largest automaker, warned that the decision could start a trade war that no side would win. The European Union and China said they will deepen ties on trade and investment as a result.

“This is stupid. It’s counterproductive,” former British trade minister Francis Maude told the BBC.

“Any government that embarks on a protectionist path inflicts the most damage on itself,” he added.

Macron warned that “economic nationalism leads to war. This is exactly what happened in the 1930s.”

Trump’s move makes good on his campaign promise to crack down on trading partners that he claims exploit poorly negotiated trade agreements to run up big trade surpluses with the United States. Commerce Secretary Wilbur Ross says the tariffs — 25 per cent on imported steel, 10 per cent on aluminium from Canada, Mexico and the European Union — take effect on Friday.

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

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

In Canada, Prime Minister Justin Trudeau said on Thursday that the tariffs were “totally unacceptable.” Canada announced plans to slap tariffs on USD 12.8 billion worth of US products, ranging from steel to yogurt and toilet paper.

“Canada is a secure supplier of aluminium and steel to the US defense industry, putting aluminium 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.”

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 that expired at midnight on Thursday.

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

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

The EU earlier threatened to counterpunch by targeting US 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.

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 US.

The US tariffs coincide with — and could complicate — the Trump administration’s separate fight over Beijing’s strong-arm tactics to overtake US 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 USD 200 billion worth of each other’s products.

The steel and aluminium 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.”

The White House released a statement from Trump on Thursday night saying of NAFTA, “Earlier today, this message was conveyed to Prime Minister Justin Trudeau of Canada: The United State (sic) will agree to a fair deal, or there will be no deal at all.”

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

Ross said 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 US products. But the two sides could not reach an agreement.

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

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

House Speaker Paul Ryan and several leading Republicans in Congress were critical of the administration’s tariff action. Ryan said there are better ways to help American workers and consumers and that he plans to work with Trump on “those better options.”