US on brink of trade war with EU, Canada and Mexico as tit-for-tat tariffs begin

Jean-Claude Juncker pledges retaliation as EU companies face 25% tariffs on steel and 10% on aluminiumTrump imposes tariffs business live

The United States and its traditional allies are on the brink of a full-scale trade war after European and Canadian leaders reacted swiftly and angrily to Donald Trump’s decision to impose tariffs on steel and aluminium producers.

The president of the European commission, Jean-Claude Juncker, promised immediate reprisal after the US commerce secretary, Wilbur Ross, told EU companies would face a 25% responsibility on steel and a 10% responsibility on aluminium from midnight on Thursday.

Europe, along with Canada and Mexico, had been granted a temporary reprieve from the tariffs after they were unveiled by Donald Trump two months ago.

However, Ross sent shudders through global financial markets when he said insufficient progression had been constructed in talks with three of the US’s traditional allies to reduce America’s trade deficit and that the waiver was being lifted.

Wall Street slumped as the Dow Jones Industrial Average closed down more than 250 points as investors sold off shares in manufacturers and corporations with global reaching. Shares across Europe also declined.

The move from Washington- which comes at a time when Trump is also threatening protectionist action against China- triggered an immediate and angry response from Canada, Brussels and from individual European capitals.

Juncker “ve called the” US move ” unjustified” and said the EU had no choice but to hit back with tariffs on US goods and a case at the World Trade Organisation in Geneva.

” We will defend the Union’s interests, in full compliance with international trade statute ,” he added. Brussels has already announced that it would target Levi’s jeans, Harley-Davidson motorbikes and bourbon whiskey.

The UK, which has hopes of agreeing a trade liberalisation deal with the US after Brexit, carried alarm at Ross’s announcement.

Liam Fox, the international trade secretary, told Britain would not rule out countermeasures or taking Washington to the WTO, which arbitrates on global trade disputes.

Speaking to Sky News he attacked the tariffs as “patently absurd” and recommended the US to think again.” It would be a great pity if we ended up in a tit-for-tat trade dispute with our closest friends .”

A spokesman for Number 10 said the government was ” profoundly disillusioned” the US had decided to apply the tariffs and that Theresa May would raise the issue with Trump at next week’s meeting of the G7 industrial nations in Canada.

” The UK and other European Union countries are close allies of the US and should be permanently and fully exempted from the American measures on steel and aluminium .”

The French president, Emmanuel Macron, called the US tariffs illegal and a mistake, while the Canadian prime minister, Justin Trudeau, issued an immediate like-for-like reaction- announcing tariffs of up to 25% on US importations worth up to 16.6 bn Canadian dollars( PS9. 6bn ), which was the total value of Canadian steel exportations to the US last year. The tariffs will encompass steel and aluminium as well as orange juice, whiskey and other food products.

With the White House having used national security legislation to introduce the tariffs, Trudeau called the measures an “affront” to Canadians who had opposed alongside their American comrades in arms.” That Canada could be considered a national security threat to the US is inconceivable .”

Canada’s foreign minister, Chrystia Freeland, went further calling her country’s $16.6 bn retaliatory tariffs” the strongest trade action Canada has taken in the postwar era. This is a very strong response. It is a proportionate reply, it is perfectly reciprocal … this is a very strong Canadian action in response to a very bad US decision .”

Mexico also denounced the move, saying it” deeply regrets and disapproves” the US decision.

The economics minstry said it would adopt equivalent measures on a variety of products, including flat steel, lamps, pork legs and shoulders, sausages and food preparations, apples, grapes, cranberries, various cheeses, and other products,” up to an amount comparable to damage caused by the United States’ action “.

It added:” This measure will be in force for as long as the US government preserves the imposed tariffs .”

Hopes remain that the fallout could be contained. Analysts at the research firm Oxford Economics said the economic hit for Europe would be well below 0.1% of GDP, as steel and aluminium merely make up a small part of the bloc’s overall exports around the world. However, they warned a tit-for-tat escalation leading to tariffs on other goods, such as vehicles, would have dire repercussions for global trade.

Last week, the Trump administration launched a national security investigated by car imports on national security grounds that could lead to tariffs on automobiles from Europe, Japan and South Korea, should trade tensions spiraling further out of control.

For the struggling UK steel industry, the news of US tariffs inspired fresh alarm. The director of UK Steel, Gareth Stace, told:” President Trump had already loaded the gun and today, we now know that the US administration has unfortunately fired it and potentially started a damaging trade war.

” Since President Trump stated his plans to impose blanket tariffs on steel imports nearly three months ago, the UK steel sector had hoped for the best but still dreaded the worst. With the expiration of the EU exemption now confirmed to take effect tomorrow[ Friday, 1 June ], unfortunately our cynicism was justified and we will now find damage not only to the UK steel sector but also the US economy .”

Representatives for the US metal industry also expressed disappointment.” Make no mistake: restricting the raw material render in the U.S. and imposing tariffs on imports from our closest trading partners places American producers directly in harm’s style ,” said Paul Nathanson of The Coalition of American Metal Manufacturers and Users.

The CBI cautioned the EU against overreacting to Washington’s move. Ben Digby, international director at the employers’ organisation, told:” The president’s measures are deeply concerning for firms in the UK, for close trading partners and across supplying chains .”

Trump announced his tariffs in March as a route of protecting US firms from inexpensive imports but Digby said the problem was caused by global overproduction of the metals and needed to be tackled jointly by Brussels and Washington.

” There are no winners in a trade war, which will damage prosperity on both sides of the Atlantic. These tariffs could lead to a protectionist domino effect, damaging firms, employees and consumers in the US, UK and many other trading partners. Now is not the time for any disproportionate escalation, and we urge the EU to consider this when initiating its response .”

But neither side showed any immediate sign of being willing to defuse the tension. Cecilia Malmstrom, the European trade commissioner, said the Brussels response would be proportionate and in accordance with WTO rules. Ross shrugged off the threat of EU retaliation, saying it would have little impact on the US economy.

Manfred Weber, the leader of the European People’s party, the largest group in the European parliament and a key ally of German chancellor Angela Merkel, warned that treating the EU as the “enemy” would damage US consumers.

” Europe does not want a trade conflict. We believe in a fair trade regime from which everybody benefits ,” he told.

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” We have tried everything to build dialogue and mutual understanding predominate. If President Trump decides to treat Europe as an adversary, we will have no choice but to defend European industry, European jobs, European interests .”

Ross blamed insufficient progress in talks with Mexico and Canada over changes to the North American Free Trade Agreement( Nafta) for the US’s decision to slap tariffs on its two neighbours.

Mexico’s under-secretary of foreign trade, Juan Carlos Baker, tweeted:” Mexico categorically rejects any unilateral, protectionist measures that distort trading in North America .”

China, too, warned that it would respond with tit-for-tat action of its own.

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