Fears of a tit-for-tat trade war surged across Asian economies yesterday, as the Trump administration's plans to impose tariffs on steel and aluminium sparked an outcry from major producing countries and triggered stock market plunges.
United States President Donald Trump said on Thursday he would sign an order imposing global tariffs of 25 per cent on steel and 10 per cent on aluminium next week, following a national security investigation launched last year. He also said the action was aimed at China, as part of ramped-up efforts to clamp down on dumping and unfair subsidies of foreign goods sold in the US.
Mr Trump also threatened yesterday to impose "reciprocal taxes" on imports from trading partners.
The tariffs announcement sparked global outrage. Canada and Brazil, the top two steel exporters to the US, promised retaliation. Mexico said it was weighing its options.
In South-east Asia, some feared that the region would be a hunting ground for exporters seeking buyers, leading to a glut that could lower prices and hurt domestic producers.
China warned that global trade would be harmed if countries followed America's example and imposed retaliatory tariffs. Its Foreign Ministry spokesman Hua Chunying urged the US to "exercise restraint in using trade protection tools" at a regular news briefing yesterday.
Analysts told The Straits Times that the impact of the tariffs on China would not be great, and Beijing is well-prepared. China is 11th on the list of countries the US imports steel from, accounting for only 2 per cent of US steel imports.
But the announcement's timing is seen as a move to apply pressure on Beijing. Mr Liu He, top economic adviser to Chinese President Xi Jinping, was in the US to discuss trade and economic cooperation between the top two economies.
Mr Trump said on Twitter: "When a country taxes our products coming in at, say, 50 per cent, and we tax the same product coming into our country at zero, not fair or smart. We will soon be starting reciprocal taxes so that we will charge the same thing as they charge us. US$800 billion (S$1.1 trillion) trade deficit - have no choice!"
Ms Iris Pang, ING's Greater China economist, told The Straits Times that Canada and the European Union could retaliate against the US.Hong Kong would be affected only if either China or the US chooses to impose more trade tariffs, she added.
South Korea, whose steel industry is struggling amid rising competition from China and is likely to be hit by tariffs, said it would continue to "actively reach out" to the US until a final decision is made. Trade Minister Kim Hyun Chong has been in Washington to meet senior officials on trade issues, including rising import restrictions.
Meanwhile, industrialists in Indonesia worry that steel shipments could be redirected there, flooding the market and hurting local industries. Mr Rudy Syamsuddin of Makassar-based Sermani Steel, which produces galvanised steel sheets for roofing, called on Jakarta to take preemptive steps. "Like the US, Indonesia must also protect its industries... Indonesia has imposed tariffs on steel, but the rampant smuggling is not controllable," he said.
Observers in Vietnam expect a modest impact, as only part of the exported volume is manufactured domestically.
Australian Trade Minister Steven Ciobo hoped Australia would be exempt from the tariffs, which could affect about US$423 million worth of exports to the US.
Analysts said the greater risk was that countries like China, a big importer of Australian minerals, might begin imposing barriers too.
European Commission President Jean-Claude Juncker said the EU "will not sit idly", calling the measure "a blatant intervention to protect US domestic industry and not to be based on any national security justification". He said the European Commission would take the matter to the World Trade Organisation.
Asian stock markets yesterday extended a Wall Street sell-off, while Wall Street and European shares tumbled in intra-day trading.
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