WASHINGTON (REUTERS) - US President Donald Trump struck a defiant tone on Friday (March 2), saying trade wars were good and easy to win, after his plan to put tariffs on imports of steel and aluminium triggered threats of retaliation from trading partners and a slide in stock markets.
The European Union raised the possibility of taking countermeasures, France said the duties would be unacceptable and China urged Trump to show restraint. Canada, the biggest supplier of steel and aluminum to the United States, said it would retaliate if hit by US tariffs.
US stock indexes recouped some losses on Friday, but were on track to end the week in the red as investors fretted over a possible global trade war. World equity markets slid further and the US dollar dropped to its lowest point in more than two years against the yen.
Trump said on Thursday that a plan for tariffs of 25 per cent on steel imports and 10 per cent on aluminium products would be formally announced next week.
“When a country (USA) is losing many billions of dollars on trade with virtually every country it does business with, trade wars are good, and easy to win,” Trump said on Twitter on Friday.
In a later social media post, Trump said his aim was to protect US jobs in the face of cheaper foreign products.
“We must protect our country and our workers. Our steel industry is in bad shape. IF YOU DON’T HAVE STEEL, YOU DON’T HAVE A COUNTRY!” he wrote.
Many economists say that instead of increasing employment, price increases for consumers of steel and aluminium such as the auto and oil industries will destroy more US jobs than they create.
Major US trade partners are likely to hit back.
Europe has drawn up a list of US products on which to apply tariffs if Trump follows through on his plan.
“We will put tariffs on Harley-Davidson, on bourbon and on blue jeans – Levi’s,” European Commission President Jean-Claude Juncker told German television.
Trump’s threats to unleash a trade war over steel crushed any hopes of substantial progress in current talks with Canada and Mexico to rework the North American Free Trade Agreement Canadian Prime Minister Justin Trudeau said any US tariffs on steel and aluminium imports would be “absolutely unacceptable”and vowed to continue to engage with US officials on the issue.
The International Monetary Fund also expressed concern about the proposed tariffs and said they likely would damage the US economy as well as the economies of other nations.
Trump’s announcement came after what one person with direct knowledge of the discussions described as a night of “chaos” in the White House due to frequent switching of positions in the administration.
While Trump often lays out stark policy positions which he later rolls back as part of a negotiating tactic, White House spokeswoman Sarah Sanders said the levels of the planned tariffs were not expected to change.
Capital Alpha Partners, a policy research group in Washington, said a quick reversal by Trump was highly unlikely.
“We also don’t see a chance for fine tuning, exceptions, carve outs, or a country-by-country policy” in the short term, the group said in a research note. “We would be hopeful that the policy could be modified in time.”
The United States is the world’s biggest steel importer, buying 35.6 million tonnes in 2017.
Peter Navarro, a White House adviser with largely protectionist views on trade, brushed off the negative effects of tariffs on US industry.
He said a 10 per cent tariff on aluminium would add one cent to the cost of a can of beer, US$45 to a car and US$20,000 to a Boeing 727 Dreamliner. “Big price effects? Negligible price effects,” he told Fox News.
But home appliance maker Electrolux said it was delaying a US$250 million expansion of its plant in Tennessee as it was worried US steel prices would rise and make manufacturing there less competitive.
Trump’s administration has imposed a series of trade duties on a range of goods from solar panels to washing machines.
It is even studying whether America’s rubber band makers need protection as he seeks to boost domestic manufacturing and employment. The decision on steel and aluminium was the most wide ranging and provocative to date and there is the prospect of more to come, with the government holding an investigation into alleged theft of US intellectual property by China.
The EU, which sees itself as a global counterweight to a protectionist-leaning Trump, made no mention of retaliation but spoke of countermeasures that conform with World Trade Organisation (WTO) rules.
Safeguard measures, last deployed by Europe in 2002 after then-US President George W. Bush imposed steel import duties, would be designed to guard against steel and aluminium being diverted to Europe from elsewhere if US tariffs come in.
But to conform with WTO rules such measures would have to apply to imports from all countries and could also hit producers including China, India, Russia, South Korea and Turkey.
Governor Scott Walker of Wisconsin, a fellow Republican, urged Trump to rethink the tariffs.
“If the president wants to protect good-paying, family-supporting jobs in America, especially here in Wisconsin, then he should reconsider the administration’s position on these tariffs, particularly on ultra-thin aluminium,” Walker said in a statement.
China, which Trump frequently accuses of unfair trade practices, called for restraint from the United States.
“China urges the United States to show restraint in using protective trade measures, respect multilateral trade rules, and make a positive contribution to international trade order,” Foreign Ministry spokeswoman Hua Chunying said.
Although China accounts for only 2 per cent of US steel imports, its massive industry expansion has helped produce a global steel glut that has driven down prices.
Economists say that Trump’s own expansionary budget policies will fuel ever larger trade deficits, essentially defeating his stated aim of having “balanced trade” with individual countries.