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EU expects to escape Trump's steel and aluminium tariffs EU expects to escape Trump's steel and aluminium tariffs
(about 1 hour later)
The EU believes it has won a temporary reprieve from President Donald Trump’s tariffs on steel and aluminium after appealing to Washington to take a step back from a potential trade war. The EU celebrated a temporary reprieve as president Trump announced billions of dollars of tariffs on Chinese steel and aluminium in what is likely to be the first move of a bitter trade war between the world’s two biggest economies.
Following intensive talks in the US, the EU’s commissioner for trade, Cecilia Malmstrom, said she believed the omens were good, although she indicated concern that the situation could unravel. Just 24 hours before tariffs were due to be enforced on the EU, the Trump administration announced it was exempting the bloc, along with Australia, Argentina, Brazil, Canada, Mexico and South Korea, while trade talks with those nations were ongoing.
The US is set to impose tariffs of 25% on steel and 10% on aluminium on Friday. The EU has argued that it should be exempt and has threatened to impose a series of retaliatory measures including import duties on US products. The Austrian chancellor, Sebastian Kurz, welcomed the development in a tweet from a summit of EU leaders in Brussels. “A trade war would have damaged both sides”, he said.
On returning to Brussels after a two-day trip, Malmstrom said she was confident the US commerce secretary, Wilbur Ross, would suggest a temporary exemption for the EU but conceded that the decision remained in Trump’s hands. Some £35bn worth of Chinese imports to the US are to be hit by tariffs of 25% on steel and 10% on aluminium.
“We expect that we are on that list, we don’t know for sure,” she told the European parliament. “It is ultimately the president who decides this. But we expect that secretary Ross will recommend that the EU is excluded as a whole.” Trump told reporters that the US trade deficit with Beijing was “out of control” at about $504bn and there was also a huge “intellectual property theft situation”.
The proposed tariffs’ main target is China, which has been flooding the world with cheap steel and aluminium. However, Trump has had few kind words to say about the EU, claiming it had made life difficult for US exporters. “It is the largest deficit of any country in the history of our world. It’s out of control”, Trump said as he signed a memorandum. “We have a tremendous intellectual property theft situation going on, which likewise is hundreds of billions of dollars.”
The US government has conducted a seven month investigation into tactics China has used to challenge US supremacy in technology, such as dispatching hackers to steal commercial secrets and demanding US companies hand over trade secrets to gain access to the Chinese market.
White House aide Peter Navarro told reporters the US was “strategically defending itself [from] … economic aggression”, he said.
The White House said that Trump would direct the office of the US trade representative to publish a list of proposed tariffs within 15 days. They are likely to cover sectors such as robotics and aerospace. There will then be 30 days for responses. In January, Trump imposed tariffs on solar panels and washing machines.
US stock markets reacted negatively, with the Dow Jones Index dropping more than 300 points. Caterpillar, 3M and Boeing – all with significant exposure to China – were among the biggest fallers. Bank and tech stocks also fell. At one point, the index was down 500 points, although by lunchtime in the US it had recovered on news that the tariffs would be subject to a period of consultation and was down 1.1% or 287 points. The FTSE-100 closed down 86 at 6952.59, or 1.23%.
China has warned that it will take “all necessary measures” to defend itself. Hua Chunying, a foreign ministry spokeswoman, referred to imports of US soybeans, airplanes, cotton and cars, saying they could be viewed as examples of “unequal” trade. The US also “refuses to export what China wants”, Hua said, possibly referring to restrictions on technology and military sales.
“We are firmly against unilateralism and protectionism,” Hua said. “China will not watch our legal interest being harmed.”
Dozens of industry groups sent an open letter last weekend to the White House warning that “the imposition of sweeping tariffs would trigger a chain reaction of negative consequences for the US economy, provoking retaliation; stifling U.S. agriculture, goods, and services exports, and raising costs for businesses and consumers”.
The EU argued in recent months that as a close ally it should be exempt, and had threatened to impose a series of retaliatory measures including import duties on their products.
Ahead of Trump’s comments, the US trade representative, Robert Lighthizer, told a senate committee that Trump had personally decided “to pause the imposition of tariffs with respect to those countries” with which trade talks were ongoing.
But the decision was only given a cautious welcome by British steel makers.
Gareth Stace, the director of UK Steel, warned that US protectionism would still have a heavy impact on European nations unless Brussels took its own measures to stem the flow of aluminium and steel into the EU.
“Tariffs are set to divert millions of tonnes of steel away from the US towards other open markets”, he said. “At 40m tonnes a year, the EU is by far the largest import market in the world and will be the obvious target for major steel exporters to the US such as Turkey and Russia.
Stace added: “The top priority here must be for the EU commission to swiftly introduce safeguard measures to guard against further expected import surges.
“Crucially, these measures must cover the same product range as the US tariffs. It is vital we do not leave large segments of the sector exposed and scupper the sector’s fragile and nascent recovery from the crisis of recent years.”
The EU’s response to the pause is one of a number of issues being discussed by leaders at a summit dinner on Thursday.
The EU’s commissioner for trade, Cecilia Malstrom, had held two days of intensive talks with the US commerce secretary Wilbur Ross ahead of the announcement.
On returning to Brussels, Malmstrom had said she was confident Ross would suggest a temporary exemption for the EU but was wary the situation could unravel once the decision was in the president’s hands.
Trump has had few kind words to say about the EU, claiming that it had made life difficult for US exporters.
Earlier this month the president told reporters: “The European Union has been particularly tough on the United States. They make it almost impossible for us to do business with them.”Earlier this month the president told reporters: “The European Union has been particularly tough on the United States. They make it almost impossible for us to do business with them.”
At a summit of leaders in Brussels, the French president, Emmanuel Macron, said he was hopeful of positive news from the US. “The good thing is to reaffirm our complete unity on this issue, which is the case,” he said. “The European commission has responded with one voice, quickly.”
EU leaders are set to discuss the issue at a dinner on Thursday, at around the time Washington will issue its list of exemptions.
Beijing’s ambassador to the World Trade Organisation said on Thursday that China was preparing a range of responses to the planned tariffs. Ambassador Zhang Xiangchen said China was considering a WTO complaint, but that was only one option.
“This is a legitimate right for China to do that. But I would not exclude other options, because if the flood approaches you have to bank up to keep it out,” he said. “Appeasement of protectionism will not work. If you surrender to protectionism you will lose your credibility and leadership in this organisation.”
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