Paul Kelly: This is Trump’s most dangerous step yet

The true heart of Donald Trump is exposed. His protectionism is a threat to American workers, ­industry and exports, a betrayal of US leadership and guaranteed to provoke retaliation leading to possibly more serious global damage.

Malcolm Turnbull had no ­option but to attack protectionism and, by extension, repudiate Trump. This is the most dangerous step from Trump since his White House victory. Given Trump’s addiction as a dealmaker this opens wide scope for deals off the back of an extreme initial play.

The risk now in many nations, including Australia, will be a ­protectionist upsurge feeding populist demands that sees politicians buckle at the knees.

European Commission President Jean-Claude Juncker said: “I don’t like to use the word trade war. But I can’t say how this wouldn’t be warlike behaviour.” Director-general of the World Trade Organisation, Roberto Azevedo, said: “The potential for escalation is real.” Trump’s action is a risk to the global trade system.

Statements from US officials of a “no exemption” policy are predictable despite the assurance Trump gave Turnbull last year at the G20 that Australia would be exempt. This assurance may yet finish as worthless. The Turnbull government, like the rest of the world, is left hostage to the political and economic vandalism on which Trump was elected.

From Trump’s position, the problem with exemptions is the “slippery slope” they involve and the exemptions bidding contest they provoke. Trade Minister Steve Ciobo was embarrassed yesterday, telling Sky News he had spoken with US Commerce Secretary Wilbur Ross but nobody knew whether or not Australia would be exempt. The US, Ciobo said, was still “working through some of the detail”.

The truth is, from the US perspective, Australia is a tiny player in this issue. The real pressure falls on Canada, a US ally and easily the bigger supplier of both steel and aluminium imports. US-Canadian relations have been thrown into crisis. There will be many calls for Canada’s exemption.

The original decision came after a convulsion within the administration and huge efforts to deflect Trump from this course. It will now trigger an open season for lobbyists screaming for special relief. It is apparent from US ­reports that Trump made a pre-emptive announcement before details were finalised.

Despite efforts to exempt US military allies Trump’s comments, so far, offer no assurances on that front. Who knows whether or not he will reassess? Ciobo said Australia was putting its case and there was a “variety” of ­reasons why Australia should be exempt, not least being the assurance Trump gave last year.

The main steel exporters to the US in order are: Canada, Brazil, South Korea, Mexico, Russia, Turkey, Japan, Germany, Taiwan with China in 10th place. In the list of aluminium exporters China ranks third after Canada and ­Russia. If Trump’s aim is to retaliate against China, these measures are far more broad-based.

Trump’s counter to European warnings of retaliation is to threaten, in turn, Europe’s car ­exports to the US market. The world is about to witness how a potential trade war can unfold.

A trade war undermines Trump’s pro-business agenda. Most US chief executives oppose the higher tariffs. Free-trade ­Republicans know the truth — you don’t win trade wars and you don’t create jobs or promote growth by protection.

The grave danger is that Trump’s move will win popular US acclaim on the basis of “putting America first” given public hostility towards industry, cheap imports and US trade partners. This could unleash even more protectionism and more retaliation.

Trump has been applauded in US steel cities. The reality, however, is that the US steel industry employs only about 150,000 workers while about seven million workers are employed in industries involving steel products that will now be more highly priced.

Trump, meanwhile, tweets that “trade wars are good” his ­latest calculated provocation in heresy. He said: “When a country (the 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.”

This is a variation on an old theme — if a politician is going to lie then make it a big lie. Where and how Trump turns this into a dealmaking project is anybody’s guess.

Under Trump’s plan, the US would impose broad tariffs of 25 per cent on steel imports and 10 per cent on aluminium imports. Trump repudiates the thrust of US trade policy in recent decades — to build arrangements and use the World Trade Organisation to keep global trade fairly open and avoid unilateral protectionism. The US stance that has underwritten global prosperity is now thrown into the trash can.