March 23, 2018

Trump tariffs risk trade war

12 March 2018, 10:00 | Melvin Schneider

How Donald Trump's tariffs morphed from 'no exemptions' to carve-outs

Australia set to secure exemption from US tariffs

German Chancellor Angela Merkel called for an European Union exemption, while powers in Asia including Japan and China threatened to take the issue to the World Trade Organization and impose their own tariffs on American industries. The U.S. has for several years had a trade surplus in steel with its NAFTA partners.

The ACC has asked Trump to reconsider the tariffs because they will drive up the cost of building chemical plants in the U.S.

President Donald Trump ratcheted up the economic pressure on the European Union over the weekend, threatening to turn allies into enemies at home and overseas with his trade pronouncements. The exemptions for Canada and Mexico, which are temporary, were also seen as being prompted part by the North American Free Trade Agreement talks, where US negotiations could use the prospect of making them permanent as a bargaining chip. "It is bad for European citizens, for Dutch citizens and it will turn out bad for USA citizens as well".

Rim countries without US involvement, a deal that will permit, among other things, more foreign auto imports into Canada - which has already infuriated USA automakers and Canada's auto workers.

"As long-standing security partners of the United States, the EU and Japan underlined to US Trade Representative Robert Lighthizer their expectation that EU and Japanese exports to the US would be exempted from the application of higher tariffs", an EU statement said after the talks, as reported by AFP.

Labor finance spokesman Jim Chalmers says steel destined for the USA from other countries will now be dumped below cost in Australia. But he exempted Canada and Mexico and held out the possibility of excluding other allies.

Europe is the biggest exporter of steel to the USA, accounting for almost 5 million tonnes of total annual imports of about 35 million, and Brussels has warned Trump it would impose countermeasures if hit.

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The exemptions for Canada and Mexico are contingent on the three countries reaching what the US views as a favorable deal renegotiating NAFTA in continuing talks. Having experienced the impact of "Japan bashing" from past United States administrations, it would rather China be the fall guy for USA trade aggression this time. He is the one retaliating against the unfair tariffs already levied by other countries.

Shortly after Trump's tweet, Turnbull said on Twitter that the relationship between the two allies was fair and reciprocal.

This transfer is usually economically inefficient because the benefits that domestic producers receive from a tariff will generally be less than the costs to domestic consumers. Trump offered them tariff protection. "Exemptions will not address the fundamental problems tariffs will create for US vehicle and truck manufacturing". It agrees with ACC that the tariffs will be harmful to competitiveness.

Politically, it is aimed at the blue-collar industrial swing states that eschewed Hillary Clinton and went to Trump to give him the crucial electoral college votes to get to the White House.

There's no indication from the American President that he'll stop at simply raising the metal bar.

"This thing is going to drag into the summer and into the fall", Schwebel said.

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