EU slams Trump's tariff proposal, vows to hit back

European Commission President Jean-Claude Juncker delivers a speech during the Matthiae-Mahlzeit feast in the town hall of Hamburg, on March 2, 2018.
European Commission President Jean-Claude Juncker delivers a speech during the Matthiae-Mahlzeit feast in the town hall of Hamburg, on March 2, 2018. PHOTO: EPA-EFE

WTO and IMF criticise US plan, fear tit-for-tat moves across the globe will spark trade war

BERLIN • The European Union has vowed to hit back at the United States, slapping tariffs on products such as Harley-Davidson bikes, Kentucky bourbon and Levi's jeans, if President Donald Trump goes ahead with a plan to impose tariffs on steel and aluminium imports.

The US plan also drew criticisms from the World Trade Organisation (WTO) and International Monetary Fund (IMF) which fear tit-for-tat moves from the rest of the world.

Mr Jean-Claude Juncker, president of the European Commission, last Friday told German news media that plans to tax the US goods, produced in the home states of key Republican leaders, had not yet been finalised, but amounted to treating them "the same way" European products would be handled if the metals tariffs go through.

"None of this is reasonable, but reason is a sentiment that is very unevenly distributed in this world," Mr Juncker declared. He said any measures taken by the bloc would conform with rules set by the WTO.

Mr Juncker's was not the only denunciation to flow in after Mr Trump told industry executives last Thursday that he planned to impose penalties of 25 per cent on steel imports and 10 per cent on aluminium imports from all countries.

Mr Steffen Seibert, a spokesman for German Chancellor Angela Merkel, said last Friday that the government "rejects" the US tariffs, adding that such measures could lead to a global trade war, which "can't be in anyone's interest".

China's foreign minister yesterday tore into the proposed tariffs, calling them "groundless".

POTENTIAL FOR ESCALATION

The WTO is clearly concerned at the announcement of US plans for tariffs on steel and aluminium. The potential for escalation is real, as we have seen from the initial responses of others.

WTO DIRECTOR-GENERAL ROBERTO AZEVEDO, in what was considered a rare comment on a member's trade stance.

"The American action to put sanctions on other countries' reasonable steel and aluminium exports in the name of 'harming national security' is groundless," Mr Wang Yi told the China Business Journal.

The White House has said the tariff details remain to be worked out. But Germany made clear that Berlin viewed such measures as damaging to its steel industry.

The US is the most important export country for Germany's rolled steel products and the second-most important destination for the EU, after Turkey, according to official data.

Mr Juncker's proposal to hit back at the US through some of the products for which it is best known in Europe was first floated last month in the German news media.

The German daily Frankfurter Allgemeine Zeitung cited a plan to target the home states of influential members of the Republican Party, including Senator Mitch McConnell of Kentucky and House Speaker Paul Ryan of Wisconsin.

"We are here, and they will get to know us," Mr Juncker said. Asked if he believed a trade war was brewing, he responded: "I can't see how this isn't part of war-like behaviour."

In what was considered a rare comment on a member's trade stance, WTO director-general Roberto Azevedo said: "The WTO is clearly concerned at the announcement of US plans for tariffs on steel and aluminium. The potential for escalation is real, as we have seen from the initial responses of others."

The IMF warned that the tariffs would likely cause economic damage to the US and its trading partners, and urged countries to resolve trade disputes without resorting to retaliatory measures.The countries likely to be hit hardest by the proposed tariffs would be Canada, Mexico, Brazil and South Korea, which together account for almost half of US steel imports. The US is also a substantial market for Britain's steel industry.

However, in a sign of the potentially adverse effects Mr Trump's plan may have on the US economy, Electrolux, a global maker of household appliances, said last Friday it would delay a planned US$250 million (S$330 million) investment to expand and modernise a Tennessee factory.

"We're concerned about the impact that the tariffs could have on the competitiveness of our US operations," the firm said.

NYTIMES, REUTERS, AGENCE FRANCE-PRESSE

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A version of this article appeared in the print edition of The Sunday Times on March 04, 2018, with the headline 'EU slams Trump's tariff proposal, vows to hit back'. Print Edition | Subscribe