Trade

The world turns on Trump over tariffs

WASHINGTON — President Donald Trump ratcheted up the economic pressure on the European Union over the weekend, threatening to turn allies into enemies at home and abroad with his trade pronouncements.

The decision to slap hefty tariffs on imports of steel and aluminum, which the White House made formal on Thursday, has roiled international markets, angered longtime trading partners and prompted threats from the president’s own party to stop the tariffs through legislation.

At the same time, Trump’s decision to exempt Canada and Mexico and allow other countries to avoid the penalties if they negotiate a deal to address U.S. national security concerns has set off a high-stakes rush among nations eager to avoid the penalties but unclear on what, exactly, the U.S. wants in return.

Trump stoked the fire on Saturday by suggesting even broader tariffs for the EU if they don’t address still-unspecified concerns.

The result is that even some of the U.S.’s closest trading partners are bewildered about where the announcement leaves them.

“The European Union, wonderful countries who treat the U.S. very badly on trade, are complaining about the tariffs on Steel & Aluminum,” he posted on Twitter. “If they drop their horrific barriers and tariffs on U.S. products going in, we will likewise drop ours. Big Deficit. If not, we Tax Cars etc. FAIR!” he tweeted.

The tweet — on top of the imposition on Thursday of sweeping 25 percent tariffs on steel imports and 10 percent tariffs on aluminum imports — provoked deeper consternation.

“The problem is when you say, ‘All right, let’s have tariffs, but let’s couple that with uncertainty’ — that’s almost worse,” Senator Jeff Flake, an Arizona Republican pushing legislation to block the tariffs, said Sunday on NBC’s “Meet the Press.” “And where one person is basically deciding, you know, tariffs go up or down depending on what kind of behavior … It’s not the way to do business.”

The uncertainty has already spooked the stock market and spurred protests from industries as diverse as car parts manufacturers and soybean farmers, which until now had cheered the president’s deregulatory agenda. Many warn they will likely raise prices on consumers because they will be forced to pay more for equipment and materials while facing retaliatory tariffs overseas.

“The burden of these tariffs, as always, will be passed on to the American consumer,” said Cody Lusk, president and CEO of the American International Automobile Dealers Association. “Car shoppers looking for a deal will instead find that they are paying a new tax to transport themselves and their families.”

The exemptions for Canada and Mexico are contingent on the three countries reaching what the U.S. views as a favorable deal renegotiating NAFTA in continuing talks. Every other country will be required to negotiate a separate deal with U.S. Trade Representative Robert Lighthizer to avoid the duties, which are scheduled to take effect in less than two weeks. But the administration has yet to provide any clarity on what that would look like.

A USTR spokeswoman said last week that “any country with which we have a security relationship is welcome to discuss with the United States alternative ways to address our national security concerns with respect to steel and aluminum imports,” adding: “If we arrive at a satisfactory alternative means to address our concerns, the president may remove or modify the restrictions.”

The result is that even some of the U.S.’s closest trading partners are bewildered about where the announcement leaves them. After a meeting with Lighthizer over the weekend Cecilia Malmström, the European Union’s top trade official, said there was still “no immediate clarity on the exact U.S. procedure for exemption,” so the discussions will continue this week.

For partners like the EU — which is the top supplier of steel to the United States in terms of value, though not volume — the exemptions serve to make the tariffs even more punitive, because their products will now be forced to compete not only with U.S. products but also with Canadian and Mexican materials, which will benefit from not having to pay the tariff.

“We are entering an era where trade war is starting to show its teeth,” French Trade Secretary Jean-Baptiste Lemoyne told POLITICO in Brussels. “And we think that’s not good news.”

Justifying the tariffs based on national security under an arcane, 56-year-old law is also likely to spur copycat actions — besides being in clear violation of the understanding that trade is conducted under internationally agreed rules, not ad hoc negotiations.

And without a clear-cut exemption process, the move aimed primarily at punishing China now risks leaving U.S. allies from Japan to the EU caught in the crossfire.

“All of a sudden you’ve forced them to deal politically with their own backlash at home,” said Chad Bown, a senior fellow at the Peterson Institute for International Economics. “If you’re thinking about trying to get your key partners to actually cooperate with you on the underlying issue … it’s going to be much more difficult to get them to do so if at the same time you’re hitting them with tariffs.”

A number of countries are already threatening retaliation if they are hit with the tariffs. The EU has compiled a list of products valued at more than €2.8 billion that includes everything from lipstick to kidney beans to motor boats that it would hit with its own 25 percent duties, while Japan and South Korea have threatened a challenge at the World Trade Organization.

Allies have little reason not to push back hard — both to protect their own industries and political base and also because Trump has done little to bolster strong relationships with them.

“The problem he’s going to have is he didn’t have a reservoir of support or sympathy to begin with,” said Bill Reinsch, a senior adviser at the Center for Strategic and International Studies. “So nobody owes him anything, and that makes it a lot easier for them to retaliate.”

Republican Senator Jeff Flake of Arizona is pushing legislation in the U.S. Congress to block Donald Trump’s tariffs | Alex Wong/Getty Images

More surprising may be the outrage in the U.S. from groups that have traditionally backed the president. Agricultural groups express alarm that their products are likely to be hard hit by retaliatory actions, while automobile manufacturers and companies that rely on aluminum cans — for beer and soup, for example — have warned the tariffs will raise costs for consumers.

“A tariff is a tax that will result in higher prices that consumers will ultimately bear,” said John Bozzella, the president of Global Automakers. “Exemptions will not address the fundamental problems tariffs will create for U.S. car and truck manufacturing. Increased costs will make our industry less competitive and harm American workers, consumers, and our economy.”

Those messages are resonating among lawmakers in Congress, where Republicans in particular who have long shied away from any sort of fight with the White House are coming out forcefully against the tariffs.

Republican Senators Ron Johnson (Wis.) and Cory Gardner (Colo.) both signaled support on Sunday for Flake’s bill to stop the tariffs, though Johnson cautioned it would not likely get enough votes to override a presidential veto.

Still, “I think somebody’s got to try,” Flake said, citing congressional success in the 1970s overriding then-President Jimmy Carter’s tariffs on oils. “I think our allies and others need to know that there is some pushback here.”

Jakob Hanke and Hans von der Burchard contributed reporting.

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