Trump steel tariffs: Trading partners threaten retaliation

  • Published
Media caption,

Trump on new tariffs: 'We haven't been treated fairly'

The main trading partners of the US have reacted angrily after President Donald Trump announced plans to impose tariffs on steel and aluminium imports.

Canada and the EU said they would bring forward their own countermeasures to the steep new tariffs.

Mexico, China and Brazil have also said they are weighing up retaliatory steps.

Mr Trump tweeted that the US had been "decimated by unfair trade and bad policy". He said steel imports would face a 25% tariff and aluminium 10%.

However, critics argue that the tariffs would fail to protect American jobs and would ultimately put up prices for consumers.

The news sent shares in Asia down on Friday, with Japan's benchmark Nikkei 225 losing more than 2% by mid-morning.

Shares in Japan's car-making giant Toyota were down more than 2% and Nippon Steel stocks down more than 4%.

Toyota said the US decision would "adversely impact automakers, the automotive supplier community and consumers".

On Friday, China urged the US to "exercise restraint in using trade protection tools".

President Trump ordered an investigation into the industry last April under a clause of a 1962 law, which grants the White House authority to restrict imports in the face of a national security threat.

The Commerce Department report found that imports were harming the domestic steel and aluminium industries, and could affect the defence industry, the Washington Post reported.

The decision on imposing tariffs rests with the President and does not need Congressional approval.

What has the political reaction been?

European Commission President Jean-Claude Juncker said the tariffs would put thousands of European jobs at risk.

"We will not sit idly while our industry is hit with unfair measures," he said. "The EU will react firmly and commensurately to defend our interests."

In Canada, the largest supplier of steel and aluminium to the US, trade minister Francois-Philippe Champagne said any tariffs would be "unacceptable".

Minister of Foreign Affairs Chrystia Freeland said Canada would take "responsive measures" if restrictions were imposed but did not give details.

Richard Warren, head of policy at the UK Steel trade association, said the proposed hike would have a "significant impact" on the UK, as the US accounts for about 15% of UK steel exports.

In other reaction:

  • Brazil, also a large steel exporter to the US, threatened "multilateral or bilateral" action to protect its interests
  • Australia's trade minister Steven Ciobo said the imposition of such tariffs would distort trade "and ultimately... lead to a loss of jobs"
  • Germany's steel industry federation, WV Stahl, said the US measures violated the rules of the World Trade Organization and would have a major impact on Germany's steel market

How has China reacted?

On Friday, Chinese foreign ministry spokeswoman Hua Chunying said: "If all countries follow the example of the United States, this will undoubtedly result in a serious impact on the international trade order", according to AFP news agency.

Li Xinchuang, vice-secretary-general of the China Iron and Steel Association, said the impact on China would not be big, adding: "Nothing can be done about Trump. We are already numb to him."

Little Chinese steel directly reaches US ports, Reuters news agency notes, because of previous anti-dumping duties, designed to prevent countries from selling their products at prices deemed unfairly low.

But US steel industry executives say Chinese steel is still widely shipped to the US through third countries.

President Xi Jinping's top economic adviser, Liu He, met the Trump administration on Thursday for "frank and constructive" talks, a White House official said.

How did other markets respond?

In early European trade, London dipped 0.5%, Paris fell 1.1% and Frankfurt dropped 1.3%, according to AFP news agency.

In South Korea, America's third largest source of steel, shares in steelmaking giant Posco were down more than 3.5%. The benchmark Kospi index was down close to 1.5%.

Image source, Getty Images
Image caption,
European steel factories, like this one in Germany, could be hit by the US tariffs

In China, investors seemed less concerned about the new tariffs. Hong Kong's Hang Seng index was down 1.7%, while the Shanghai Composite was down 0.7%.

In Australia, the benchmark S&P/ASX 200 index had lost 1% by midday trade, dragged down by losses in commodities. Stocks in mining giant BHP Billiton were down more than 1.5%.

What did Trump say?

Mr Trump pledged to rebuild the US steel and aluminium industries which he said had suffered "disgraceful" treatment from other countries, in particular China, for decades.

"When our country can't make aluminium and steel... you almost don't have much of a country," he said.

"We need great steel makers, great aluminium makers for defence."

Image source, Getty Images
Image caption,
The US is reliant on steel imports from more than 100 nations

Mr Trump's announcement was slightly delayed amid reports of disagreement among his aides.

More than a dozen metals executives, including representatives from US Steel Corp and Arcelor Mittal, stood alongside him as he made the announcement.

During his presidential campaign, Mr Trump said that foreign countries were "dumping vast amounts of steel all over the United States, which essentially is killing our steelworkers and steel companies".

Since taking office he has said cheap imports from China are harming the viability of industry in the US.

What shape is the US steel industry in?

The US imports four times more steel than it exports and is reliant on steel from more than 100 nations.

The US Department of Energy says the steel industry is recovering after a slump following the 2008 financial crisis.

But it is an industry significantly weaker than it was at the turn of the millennium. In 2000 the US produced 112m tons of steel - a figure that had fallen to 86.5m tons in 2016.

In 2000, 135,000 people were employed in the industry - a figure that fell to 83,600 in 2016.