US allies caught in Trump tariff crossfire

Donald Trump has declared ‘trade wars are good and easy to win’ as retaliation threats to his US protectionism quickly appeared.

US President Donald Trump speaks on steel and aluminium tariffs on Thursday. Picture: AFP

US President Donald Trump has declared “trade wars are good and easy to win” as a series of tweets caused fresh confusion over sweeping steel and aluminium tariffs, with “reciprocal taxes” now on the table.

A day after Mr Trump announced 25 per cent and 10 per cent tariffs on steel and aluminium imports, sparking fears of a global trade war, the US leader said his administration would be taxing other countries “they same thing as they charge us”.

Australia eliminated tariffs on US steel and aluminium products under a free trade agreement (AUSFTA), raising the possibility the more than $US400 million ($517m) in exports to America might be exempted.

“When a country Taxes [sic] our products coming in at, say, 50%, 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. $800 Billion Trade Deficit-have no choice!” Mr Trump tweeted.

“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. Example, when we are down $100 billion with a certain country and they get cute, don’t trade anymore-we win big. It’s easy!”

Fears of a trade war between the US and China have soared after Mr Trump embraced a new era of protectionism by ­announcing his intent to levy the sweeping tariffs on steel and aluminium imports.

The move fulfils part of Mr Trump’s campaign promise to target Chinese imports after last week declaring the Asian superpower was “absolutely killing us” on trade. But it will impact much harder on US allies, including Canada and the EU, that export far more steel to the US than does China. Mr Trump said the move was aimed at restoring US jobs and industry that had been weakened by free trade and the flooding of foreign steel and aluminium into the US.

“We’ll be imposing tariffs on steel imports and tariffs on aluminium imports,” the President said. “You will have protection for the first time in a long while, and you’re going to regrow your industries. There won’t be dumping on our country. What they do is they dump massive amounts of product in our country and it just kills — it destroys our companies and our jobs.”

US investors were rattled by the news and the potential for a trade war, sending the Dow Jones industrial average plummeting by 586 points, a loss of 2 per cent, in early afternoon trading before closing 420 points down.

The Times reports the European Commission on Friday vowed to retaliate as the World Trade Organisation made a rare intervention to warn the dispute could escalate into a full-blown trade war.

Richard Warren, head of policy at UK Steel, said that the proposed tariffs “smack of short-termism, protectionism and would be rife with unintended consequences for global trade and for the users of steel in the US”.

“Whichever way you look at it, the UK exports of steel into the US are clearly no threat to US security and pose no threat the health of the US steel sector,” Mr Warren added. “We are one of its oldest and closest allies.”

Ross Murdoch, national officer for steel at the GMB union, said that the tariffs were “neither fair nor justified” and could put “thousands” of European steel jobs at risk.

The European Commission said that it would shortly unveil trade “countermeasures” to “rebalance the situation”.

This could involve applying 25 per cent tariffs on about $US3.5 billion ($4.5bn) of imports from the US.

Roberto Azevedo, director-general of the WTO, said: “The potential for escalation is real . . . A trade war is in no one’s interests.”

The issue had been decided by Mr Trump alone after a fierce debate in the White House between those supporting free trade and those calling for protectionist measures.

The debate pitted the free traders, including National Economic Council director Gary Cohn, Treasury Secretary Steve Mnuchin, ­national security adviser H.R. McMaster and Defence Secretary Jim Mattis, against the proponents of protectionist policies; Wilbur Ross, US Trade Representative Robert Lighthizer and trade ­adviser Peter Navarro.

Mr Mattis wrote to the White House suggesting “targeted tariffs” that don’t hit defence allies. “It is critical that we reinforce to our key allies that these actions are focused on correcting Chinese overproduction and countering their attempts to circumvent existing anti-dumping tariffs,” he wrote.

China is the 11th-biggest ­exporter of steel to the US, shipping 784,400 tonnes to the US last year. By contrast, Canada exported the most steel to the US with 35.9 million tonnes in 2017, while Brazil, South Korea, Mexico, Russia, Turkey, Japan, Germany, Taiwan and India also ranked in the top 10.

“Our steel and aluminium industries (and many others) have been decimated by decades of unfair trade and bad policy with countries from around the world,” Mr Trump tweeted yesterday.

“We must not let our country, companies and workers be taken advantage of any longer. We want free, fair and SMART TRADE!”

Canada warned it would take “responsive measures” to defend its aluminium and steel industries if any tariffs were introduced, while the EU said it would “react firmly and commensurately to ­defend our interests”.

“As the No 1 customer of American steel, Canada would view any trade restrictions on Canadian steel and aluminium as absolutely unacceptable,” Canadian Foreign Minister Chrystia Freeland said.

The CEO of Canada’s aluminium association declared Mr Trump had “just initiated an all-out trade war”.

European Commission president Jean-Claude Juncker said protectionism “cannot be the ­answer to our common problem in the steel sector”.

“We strongly regret this step, which appears to represent a blatant intervention to protect US domestic industry and not to be based on any national security justification,” he said.

White House press secretary Sarah Huckabee Sanders said: “The President is concerned about the men and women of this country who have been forgotten about, the industries that our country was founded ... on.”

Cameron Stewart is The Australian’s Washington correspondent and US contributor for Sky News Australia