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EU, Mexico, and Canada impose retaliatory tariffs in response to the US

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  1. Vibe
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    By David J. Lynch, Damian Paletta and James McAuley
    May 31 at 2:32 PM

    President Trump Thursday imposed tariffs on imported steel and aluminum from the European Union, Canada and Mexico, triggering immediate retaliation from U.S. allies against American businesses and farmers.

    The tariffs — 25 percent on steel and 10 percent on aluminum — take effect at midnight Thursday, marking a major escalation of the trade war between the U.S. and its top trading partners.

    “It’s more than highly unusual. It’s unprecedented to have gone after so many U.S. allies and trading partners, alienating them, and forcing them to retaliate,” said economist Douglas Irwin, author of a history of U.S. trade policy since 1763. “It’s hard to see how the U.S. is going to come out well from this whole exercise.”

    In response, the E.U. said it would impose duties “on a number of imports from the United States,” referring to a 10-page list of targets for retaliation it published in March, which included Kentucky bourbon and Harley-Davidson motorcycles. European leaders also vowed to proceed with a complaint to the World Trade Organization.

    “This is protectionism, pure and simple,” said Jean-Claude Juncker, president of the European Commission.

    The Mexican government said it would levy import taxes on U.S. exports of pork bellies, apples, cranberries, grapes, certain cheeses, and various types of steel. And Canada levied a surtax on $16.6 billion of American steel, aluminum and other products, as Prime Minister Justin Trudeau pronounced Trump’s claim to be protecting national security an “affront” to Canadians who fought alongside American GIs from World War II to Afghanistan.

    Trump's announcement of a 25 percent tariff on steel imports could greatly affect products that you may not know depend on it, like Reddi-wip. (Jhaan Elker/The Washington Post)

    The root of the current trade mess lies in excess global steel production capacity, which most analysts blame on China. The Commerce Department says that worldwide steelmakers produce 700 million tons of steel beyond annual demand, or seven times total U.S. production.

    That flood of steel has depressed prices, making it difficult for many American steelmakers to compete, Commerce says. Last year, Ross negotiated voluntary reductions in capacity. But Trump, who has long expressed enthusiasm for import tariffs, rejected the deal as inadequate.

    President Trump had announced the tariffs in March, but gave several U.S. allies temporary exemptions while they negotiated potential limits on shipments to the United States.

    Commerce Secretary Wilbur Ross said the president acted on national security grounds, seeing a rising tide of imports as a threat to the domestic metals industry. “Without a strong economy, you can’t have a strong national security,” Ross said.

    European Commission President Jean-Claude Juncker said May 31 the E.U. will take counter-measures after the United States opted not to exempt it from tariffs. (Reuters)

    Officials from the three trading partners — among Washington’s closest allies for decades — have dismissed the idea that their shipments to American customers endanger the United States — and some prominent Republicans attacked the tariffs as wrongheaded.

    “This is dumb. Europe, Canada, and Mexico are not China, and you don’t treat allies the same way you treat opponents,” said Sen. Ben Sasse (R-Neb.). “We’ve been down this road before—blanket protectionism is a big part of why America had a Clutch Plague. ‘Make America Great Again’ shouldn’t mean ‘Make America 1929 Again.”

    The United States negotiated voluntary export limits with several other friendly nations, including South Korea, Argentina, Australia and Brazil. Ross said that he intends to continue talks with European diplomats and officials from Canada and Mexico, but those are likely to be contentious.

    “We continue to be quite willing, indeed eager, to have further discussions with all of these parties,” Ross told reporters, speaking from Paris where he is attending meetings at the Organization for Economic Cooperation and Development.

    Thursday’s action also is expected to complicate U.S. efforts to confront China over trade practices that the administration regards as unfair. The E.U. shares many of Washington’s concerns about China’s efforts to acquire advanced technology through compulsory licensing practices, cybertheft and other measures.

    But European officials are increasingly irritated by Trump’s aggressive use of obscure provisions in U.S. trade laws against U.S. allies.

    “We are deeply disappointed that the US has decided to apply tariffs to steel and aluminium imports from the EU on national security grounds. 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,” Britain said in a statement. “We will defend the UK’s interests robustly. We continue to work closely with our EU partners and will consider carefully the EU’s proposals in response.”

    President Emmanuel Macron has couched Trump’s tariffs as a “nationalist retrenchment” reminiscent of Europe in the 1930s.

    Germany has perhaps the most to lose among E.U. nations if the spat escalates into a full-blown trade war. Although the U.S. market amounts to a low single-digit percentage of German steel industry output, German politicians and industry groups have said they are concerned that tit-for-tat measures could end in damaging tariffs on foreign automobiles, an outcome that Trump has repeatedly threatened.

    The administration earlier in May opened a trade investigation into vehicle imports, with the possibility it will end in tariffs on foreign cars justified by the same “national security” provision used to implement the metals tariffs.

    While Thursday’s action cheered American steel producers, companies that use imported metals said that it endangered U.S. jobs and investment. Auto parts makers said that they rely upon global supply chains and sometimes can buy their specialty steel and aluminum from only one or two sources worldwide.

    “Our members could face having to pay double tariffs on some materials necessary to manufacture parts in the US,” said a statement from the Motor & Equipment Manufacturers Association. “Industries like ours, which require long-term investments in facilities and employees, depend on regulatory and market stability. These actions have thrown all of that up in the air.”

    Trump also drew fire from members of his own party, who generally favor fewer trade restrictions. “Bad news that @POTUS has decided to impose taxes on American consumers buying steel and aluminum from our closest allies --Canada, the EU, and Mexico (with whom we run a trade surplus on steel),” tweeted Sen. Patrick Toomey (R-Pa.). “In addition to higher prices, these tariffs invite retaliation.”

    Ross, meanwhile, said that he still plans to leave for China on Friday for the resumption of trade talks. Earlier this week, there were reports that the talks might be canceled following Trump’s renewed threat to impose import taxes on $50 billion in Chinese products.

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