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Tom Kool

Tom Kool

Writer, Safehaven.com

Tom majored in International Business at Amsterdam’s Higher School of Economics, he is now working as news editor for Oilprice.com and Safehaven.com

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Trump’s Trade War Turns Allies Into Enemies

Trump

To the shock of the Republican party, major U.S. allies and, well, probably even China, Trump announced today that hefty steel and aluminum import tariffs will apply to the European Union, Canada and Mexico, and retaliation is already in the works.

After being exempted from 25-percent steel tariffs and 10-percent aluminum tariffs earlier this year, the European Union, Canada and Mexico now have new targets pinned on them, with the administration defending the move Thursday as protecting national security.

Exemptions remain in place for South Korea, Brazil, Australia and Argentina, but deals apparently could not be reached with the EU, Canada and Mexico.

“The president’s actions are about protecting American steel, American aluminum,” White House spokesman Raj Shah told Fox news. “They’re critical for national security. And he’s worked to exempt certain countries and certain allies for which we have trading or security relationships. But in these instances it wasn’t possible and the president took action.”

Europe, Canada and Mexico will take action, too…

European Union leaders have vowed to retaliate with tariffs on U.S. good, while Mexico has said it will subject imports of U.S. pork, steel and other products to new tariffs.

More specifically, the EU said it would place an equal amount of tariffs on U.S. goods, which will likely come from its previous list when the tariff threat initially arose earlier this year.

Canadian Prime Minister Justin Trudeau said the steel and aluminum tariffs were "totally unacceptable" and a violation of a centuries-old relationship between the US and Canada. 

"These tariffs will harm industries and workers on both sides of the Canada-US border and will disrupt supply chains that have made North American steel more competitive across the globe," Trudeau said.

France minced words a bit less, with President Emmanuel Macron calling Trump’s tariffs “unlawful”, while German spokesman Steffen Seibert warned that “this measure brings the danger of a spiral of escalation, which in the end harms everyone”.

Related: Emerging Markets Face Financial Turmoil

Even the GOP was taken by surprise, and the timing is ill-thought-out as Republicans are scrambling amidst a decisive midterm election campaign.

There is “mounting evidence that these tariffs will harm Americans”, Politico quoted Senate Finance Chairman Orrin Hatch (R-Utah) as saying, while Sen. Ben Sasse (R-Neb) warned that this type of policy led to the Great Depression. “This is dumb. Europe, Canada and Mexico are not China, and you don’t treat allies the same way you treat opponents,” Sasse was quoted as saying. 

“’Make America Great Again shouldn’t mean ‘Make America 1929 Again’”, he said.

According to Politico, most senior Capitol Hill staffers weren’t even notified about the decision until late Wednesday night.

“This is a big mistake. These tariffs will raise prices and destroy manufacturing jobs, especially auto jobs,” Sen. Lamar Alexander (R-Tenn.), was quoted as saying, describing the tariffs as “basically higher taxes on Americans”.

For Canada, the largest exporter of steel to the U.S. by value, the news hits hard.

(Click to enlarge)

Source: CNN

The next drama on the world trade stage is likely to be even worse negotiating leverage for the U.S. over NAFTA.

Markets are expected to dip on this news. The Dow was already trading down 247 points by 2:48p.m. EST.

(Click to enlarge)

By Tom Kool for Safehaven.com 

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