The raising trade tariffs made by Trump, will stand long or short on impact?
US President Donald Trump said Thursday his administration will impose tariffs on steel and aluminum imports as early as next week, a highly controversial move that Trump framed along economic and national security lines. This was last week.
Trump increased pressure on Canada and Mexico over trade on Monday, saying the two could avoid being caught in his planned hefty tariffs on steel and aluminum if they ceded ground in talks on a new NAFTA trade deal.
But not only the two countries will be affected, Trump’s determination to push ahead with a 25% tariff on steel imports and a 10% duty on aluminum has prompted threats of retaliation from the European Union, China and Brazil among others.
Trump’s planned steel and aluminum tariffs, announced on Thursday, have also met resistance from some senior figures in his own Republican Party.
“Trump opted for the hardest decision: to harm everyone, without taking into account that the steel and aluminum industry are integrated and closely linked to the arms industry”, said Carlos Elizondo Mayer Serra, economist.
House of Representatives Speaker Paul Ryan, a Republican whose state of Wisconsin would be hit by proposed European counter-tariffs on Harley Davidson motorcycles, urged the White House on Monday not to push ahead with the action.
“Mexico shouldn’t be included in steel & aluminum tariffs. It’s the wrong way to incentivize the creation of a new & modern NAFTA,” Ildefonso Guajardo, Mexican Economy Secretary wrote on Twitter. Canadian Finance Minister Bill Morneau said the country was negotiating on NAFTA with a partner that has “changed the terms of the discussion.”
The head of the World Trade Organization warned of a real risk of triggering an escalation of global trade barriers and a deep recession.
“We must make every effort to avoid the fall of the first dominoes. There is still time,” WTO Director General Roberto Azevedo told the heads of WTO delegations at a closed-door meeting in Geneva, Reuters reported.
From Bush-era steel duties to the European Union’s “bra wars” skirmish with China, global trade wars have often threatened but never quite gotten off the ground and President Donald Trump’s planned steel and aluminum tariffs will likely play out the same way.
The steel tariffs were ruled illegal by the World Trade Organization in 2003 and the 2005 spat over Chinese brassiere exports, dubbed a “storm in a D-Cup” by Britain’s media, was resolved in emergency talks between Brussels and Beijing. That is a pattern that could be repeated now, economists say.
US industry charges that there have been losses worth hundreds of billions of dollars from stolen ideas and from being forced to turn over intellectual property as a cost of doing business in China.
Mexico will respond with caution, will put tariffs, but first will be Canadians and Europeans to put aggressive tariffs. “Europeans will impose taxes, for example, directed and thought like whiskey, which will strongly impact republican states”, Elizondo Mayer Serra said.
“Separating China out from the crowd that is affected by current trade efforts could be taken as a material escalation,” Morgan Stanley strategists Michael Zezas and Meredith Pickett said in a research note.