[author: Laura Anne Schierhoff]
President Trump did not back away from his threat to impose tariffs – 25 percent on steel and 10 percent on aluminum – on several of the U.S.’s allies. Trump announced worldwide steel and aluminum tariffs in March, but granted exemptions to the country’s major trading partners. Canada, Mexico, and the EU were among the countries granted relief while the U.S. pursued negotiations to address the administration’s concerns about the state of domestic steel and aluminum production. Those negotiations had a June 1, 2018 deadline, which was when Trump decided to move forward without any more exemptions or extensions.
The Trump Administration’s decision to impose steel and aluminum tariffs on several EU countries, Canada, and Mexico came under immediate fire and those countries announced plans to retaliate with their own tariffs against American products. The EU’s top trade commissioner called the tariffs “illegal” and plans to take the case to the World Trade Organization (WTO). The EU is also looking at retaliatory measures against the U.S. Trump imposed the steel and aluminum penalties under a 1962 law that gives the President broad power to increase or reduce tariffs on goods deemed critical to national security. Many countries are taking issue with the fact that these tariffs are justified by national security concerns, arguing that reason is completely inaccurate and these tariffs are nothing more than pure protectionism.
Other U.S. allies and trade partners have stated they will retaliate and seek remedies through the WTO and the North American Free Trade Agreement (NAFTA). Canada’s Prime Minister, Justin Trudeau, said his country will be imposing “dollar-for-dollar tariffs” on U.S. goods that will take effect July 1, 2018. Mexico has already imposed a series of tariffs against certain American products, including pork, apples, potatoes, bourbon, and cheese. Getting rid of the exemptions for Canada and Mexico could also complicate ongoing negotiations on NAFTA. The NAFTA talks were one factor in the administration’s decision to originally grant exemptions to Canada and Mexico from the steel and aluminum tariffs. However, it seems these renegotiation talks were taking too long and not as productive as the Trump Administration would have liked.
Ahead of the Group of Seven (G7) Summit that will begin June 8, 2018, Canada, Japan and the EU have come together to increase pressure on the U.S. However, some countries are trying to de-escalate the trade dispute, such as Germany, a country that would be hard-hit by a full-fledged trade war. President Trump has also threatened to put new taxes on European vehicles, which EU top officials are saying would create enormous damage not only to the European economy, but also to the U.S.
Another looming trade war is between the U.S. and China. The latest round of trade talks between Washington and Beijing failed to yield a breakthrough. While just a couple weeks ago, U.S. Treasury Secretary Steven Mnuchin had declared the trade ware to be “on hold,” shortly after that the White House declared their intention to move forward with tariffs on $50 billion worth of Chinese goods as punishment for intellectual property theft. The Chinese government said the announcement was in violation of the previous consensus reached. The Trump Administration will unveil the final list of Chinese products targeted by the tariffs on June 15, 2018. China has promised to enact retaliatory sanctions of its own on U.S. agricultural goods, automobiles and planes. The White House argues that the cost of not responding to China’s unfair trade practices is more costly to the economy than any retaliatory tariffs.
