US levies steel, aluminum tariffs on allies, risks trade war

[WASHINGTON] Washington will impose tariffs on steel and aluminum imports from the European Union, Canada and Mexico from midnight on Thursday(Friday noon,Singapore time), ending months of uncertainty over potential exemptions and sharply escalating the risk of a trade war.

US Commerce Secretary Wilbur Ross told reporters in a telephone briefing that Washington would proceed with plans for a 25 per cent tariff on steel and a 10 per cent tariff on aluminum imports, although he said the door was still open for negotiations without specifying what measures could be taken.

"We look forward to continued negotiations, both with Canada and Mexico on the one hand, and with the European Commission on the other hand, because there are other issues that we also need to get resolved," Mr Ross said.

The tariffs, which have prompted several challenges at the WTO, are aimed at allowing the US steel and aluminum industries to increase their capacity utilization rates above 80 per cent for the first time in years.

Worries about a US trade war with the European Union weighed on Wall Street stocks at the open, but shares of US steel and aluminum makers were up strongly.

President Donald Trump's administration has threatened to impose tariffs on car imports, is engaged in negotiations with China to reduce America's yawning trade deficit and has said it will punish Beijing for stealing its technology by imposing tariffs on US$50 billion of imports from China.

Mr Ross himself heads to Beijing on Friday where he will attempt to get firm deals to export more US goods in a bid to cut America's US$375 billion trade deficit with China.

After months in which it appeared the Trump administration had been backing away from tariffs amid infighting between the president's top economic advisers, Washington has over the past week ramped up its threats on trade.

German magazine Wirtschaftswoche reported on Thursday that Trump had told French President Emmanuel Macron he wanted to stick to his trade policy long enough that Mercedes-Benz cars were no longer cruising through New York. That share prices of BMW, Daimler and Volkswagen.

The Trump administration launched a national security investigation last week into car and truck imports, using the same 1962 law that he has applied to curb incoming steel and aluminum.

France's Finance Minister Bruno Le Maire had met with Mr Ross on Thursday in a bid to end the stand-off over steel and aluminum, a move that ultimately failed to sway the US administration.

"It's entirely up to US authorities whether they want to enter into a trade conflict with their biggest partner, Europe," Mr Le Maire told reporters after the meeting.

Europe did not want a trade war, he said, but Washington had to back down from "unjustified, unjustifiable and dangerous tariffs". The European Union would respond with "all necessary measures" if the United States imposed them.

The European Commission, which coordinates trade policy for the 28 EU members, has said the bloc should be permanently exempted from the tariffs since it is an ally and not the cause of steel and aluminum overcapacity.

The EU has threatened to retaliate with tariffs on Harley Davidson motorcycles and bourbon, measures aimed at the political bases of Republican legislators who they wanted to stand up to Mr Trump.

German Chancellor Angela Merkel said the European Union would give a "smart, determined and jointly agreed" response to new US tariffs that she said would break World Trade Organization rules.

EU countries have given broad support to the Commission's plan to set duties on 2.8 billion euros (S$4.38 billion) of US exports, including whiskey and motorbikes, if Washington ends the EU tariff exemption. EU exports potentially subject to U.S. duties are worth 6.4 billion euros.

However, Economy Minister Peter Altmaier appeared with Mr Le Maire in Paris on Wednesday, pledging a unified line.

"We are prepared to react in a united and clear way whatever the decision of the (US) president," he said.

The Trump administration has given permanent metals tariff exemptions to several countries including Australia, Argentina and South Korea, but in each case set import quotas.

Friday's deadline for exemptions also affects Mexico and Canada, which are in negotiations with the United States on the North American Free Trade Agreement that Mr Trump has said he wants to revamp, or abandon if the talks fail.

REUTERS