The Trump administration said on Thursday that it would impose steep tariffs on metals imported from its closest allies after proposing them earlier and the year and then using the threat as leverage during the NAFTA talks with Canada and Mexico. The European Union, Canada and Mexico, which will face 25 percent tariffs on steel and 10 percent on aluminum, quickly denounced the action.
Allies of the U.S. were pissed. Europe, Canada and Mexico are threatening to respond in kind, raising the potential of an all-out trade war. Chancellor Angela Merkel of Germany, on Thursday, called the tariffs “illegal,” while saying “the measures carry the threat of a spiral of escalation that will result in damaging everyone.” Prime Minister Justin Trudeau of Canada said it was “inconceivable” that Canada “could be considered a national security threat.” Within minutes of the American action, Mexico had detailed a list of goods to target for retaliation, including steel, pork, apples, cranberries and cheeses.
Mr. Trudeau said the countries had the broad lines of “a decent win-win-win deal” last week. But Vice President Mike Pence phoned to tell the Canadian prime minister that the precondition of a NAFTA deal was a sunset clause, meaning the pact would automatically expire unless the three countries voted to continue it, which Canada and Mexico basically called stupid.
European officials had tried offering the United States a limited trade deal, but officials there grew wary after Mr. Trump announced that he would begin a separate trade investigation into automotive imports. If car tariffs go into effect, they would especially hurt Germany’s economy.
Allies have vowed to challenge the legal statute the Trump administration used to roll out the tariffs, which is related to national security. With the tariffs set to go into effect at midnight, all three allies are readying their counterattacks.
Along with fighting the tariffs at the World Trade Organization, European officials have been preparing levies on an estimated $3 billion of imported American products in late June. In a joint statement, ministers from France and Germany said the countries would coordinate their response.
Whether American consumers and companies get caught in the crossfire depends on how it all plays out. After the tariffs took effect on China, Russia, Japan and Turkey in late March, prices on steel and aluminum broadly began to rise, which helps American steel manufacturers but hurts American businesses that use foreign steel.
The steel and aluminum tariffs already appear to be hurting construction companies, retailers and manufacturers — by raising their costs and injecting uncertainty into the price and availability of the metals going forward. “These tariffs are hitting the wrong target,” said Representative Kevin Brady, Republican of Texas. “When it comes to unfairly traded steel and aluminum, Mexico, Canada and Europe are not the problem — China is.”
In a more pointed statement, Senator Ben Sasse, Republican of Nebraska, called the tariffs “dumb.”
“Europe, Canada and Mexico are not China, and you don’t treat allies the same way you treat opponents,” he said.
For more: NY Times