BEIJING: Major steel and aluminum producing nations on Friday condemned US President Donald Trump’s plan to impose tariffs on the industry, as stock markets plunged on fears of an imminent tit-for-tat trade war.
After weeks of rumor and counter-rumor about his administration’s intentions, Trump on Thursday announced he would sign off on measures designed to protect US producers “next week.”
The tariffs – 25 percent on steel and 10 percent on aluminum – cover two materials that are the lifeblood of the construction and manufacturing sectors.
The announcement was greeted with fury within key US trading allies such as Canada, the EU, Australia and Mexico, as well as rival China.
It also caused jitters across global stock markets.
The benchmark Dow Jones Industrial Average lost 1.7 percent on Thursday and Asian markets quickly followed suit, with Tokyo closing 2.5 percent down and Hong Kong falling 1.5 percent Friday.
China, which has been in Trump’s crosshairs over its trade practices since his presidential campaign, urged the US to “exercise restraint in using trade protection tools and respect multilateral trade rules.”
“If all countries followed the example of the United States, there will undoubtedly result in a serious impact on the international trade order,” foreign ministry spokeswoman Hua Chunying told a regular news briefing.
European Commission chief Jean-Claude Juncker said the EU “will react firmly” to defend its interests.
“We will not sit idly while our industry is hit with unfair measures that put thousands of European jobs at risk,” he added.
German Foreign Minister Sigmar Gabriel called on the EU to respond “with determination,” saying the move from Washington was “not at all acceptable” and urging Trump to rethink the announcement.
Canadian Trade Minister Francois-Philippe Champagne responded even more bluntly.
“Any tariffs or quotas that would be imposed on our Canadian steel and aluminum industry would be unacceptable,” Champagne told parliament. “Any such decision would have an impact on both sides of the border.”
Australia Trade Minister Steve Ciobo said his biggest concern was now “retaliatory measures” by other major economies.
“That’s in no-one’s interests,” he told reporters.
Trump has long threatened to impose tariffs on steel and aluminum, accusing other countries of dumping and deploying “unfair” trade practices.
He has been particularly critical of China, although steel and aluminum each account for less than one percent of the country’s total exports to the United States.
The timing of Trump’s announcement was provocative for Beijing – its top economic envoy Liu He was in Washington and holding meetings at the White House on Thursday.
“They candidly exchanged their views, building the necessary conditions for the next step in deepening cooperation,” Hua said of the meetings with US officials.
China has previously warned it was ready with counter-measures should the Trump administration deploy tariffs, but the foreign ministry did not indicate that any such moves were in the works.
The White House has embarked on a campaign to renew American infrastructure, with steel likely a major input.
But Trump’s announcement has faced significant domestic opposition, including within his own White House and party.
US automakers, oil and gas producers and other industry groups publicly urged the president not to impose new trade barriers on the metal imports, warning the measures could jack up prices and invite reprisals, harming the economy.
‘Danger is contagion’
Sources familiar with Trump’s decision say he faced stern opposition from aides, including top economic advisor
Gary Cohn, who argued the move could ultimately damage US industry.
Up to the last moment, there were doubts about whether Trump would pull the trigger.
But trade hawks like Peter Navarro – a presidential aide who, after weeks on the sidelines, was by the president’s side as he made his remarks – appeared to have won the day.
The same sources said it is not impossible that the shock announcement is followed by carve outs that make the measures more palatable to allies in Europe, Canada and South Korea.
Trump’s decision, which leans on a rarely used trade provision allowing protections for national security, could
also hit other countries far more than China.
China is the world’s largest steel producer but accounts for less than one percent of US imports and sells only 10 percent of its wrought aluminum abroad. Steel producers in Canada, Brazil, Mexico, South Korea and Turkey rely far more heavily on the US market.
The Commerce Department said last month it determined that the global glut of steel and aluminum threatened
US national security, and presented the White House with a set of options, including quotas, tariffs targeting specific countries, or across-the-board tariffs on all imports of the metals.
Trump’s proposal most closely resembled the last option.
Analysts said that while there were initial sharp stock market losses in the steel and aluminum sectors following the announcement, the main fear was what it could mean in the future.
“We think overall, the danger is contagion – the reaction – rather than the actual tariffs themselves,” Fat Prophets resources analyst David Lennox told Agence France-Presse.
“We don’t know the details yet and it’ll be the reaction of the countries where the tariff will be applied. Where or how will those countries retaliate? Because it will happen and that’s what people worry about.”