President Donald Trump is intensifying hostilities in his global trade war. Photo / AP
President Donald Trump is intensifying hostilities in his global trade war. Photo / AP
President Donald Trump plans to announce as soon as Friday the imposition of sweeping tariffs on steel and aluminum imports from Canada, Mexico, and the European Union, three people familiar with the plan said.
Frustrated over the failure of those US trading partners to agree to a range of demands, the president chose to sharply escalate his global trade war rather than grant further tariff waivers.
The import taxes could take effect as soon as Saturday.
The move is likely to have an immediate impact on global trade in steel and aluminum, particularly between the United States and Canada, the nation's largest source of imported steel.
The decision also invites retaliation from each of the trading partners, which have vowed to erect new barriers to a range of US products.
The White House process remains very fluid and the people cautioned that Trump has been talked out of imposing tariffs at the last minute before.
The president has been threatening to toughen the US trade stance against Canada and Mexico since last year, only to back down time and again after leaders of both countries and a range of US lawmakers intervened.
European Commissioner for Trade Cecilia Malmstrom. Photo / AP
Trump's bold tariff move threatens to upend negotiations over a new North American trade deal.
Over the Memorial Day weekend, Canadian officials including Prime Minister Justin Trudeau and Foreign Minister Chrystia Freeland engaged in a desperate bid to head off the tariffs by offering concessions aimed at reaching at least a limited deal, according to one source who asked for anonymity to discuss confidential discussions.
If the tariffs are imposed, the trade talks will continue, according to Eric Miller, president of Rideau Strategy Group. Mexico is not a major metals producer and Canada is eager for the talks to succeed.
"I fully expect they'll get the tariffs. Canada will retaliate, but they won't say that they'll pull out," he said. "They are going to try to minimise the damage."
Imposing the metals tariffs on the EU will also intensify a clash with the European Union over multiple tariffs, Washington's efforts to prevent multinational businesses from trading with Iran and a new digital privacy policy.
The 28-nation European Union symbolises everything Trump hates about globalisation.
While his complaints about China may be better known, he has long chafed at the EU's trade practices.
The US last year incurred a trade deficit of more than US$150 billion ($214.7b) with the EU, it's No. 1 trading partner, which Trump has labelled "unacceptable."
Though most economists say that trade flows are determined by broader economic forces such as national savings rates, Trump blames European tariffs for the imbalance.
The president has been especially zealous about the automobile industry. The EU adds a 10 per cent import tax to American passenger cars while European cars arriving in the US face just a 2.5 per cent duty.
The EU's shared sovereignty also rebukes Trump's nationalist preference for bilateral trade deals, as he made clear last month during a visit by French President Emmanuel Macron.
"Trade with France is complicated because we have the European Union," Trump said, sitting alongside the French leader. "I would rather deal just with France. The union is tough for us. ... So we have to make a change."
Commerce Secretary Wilbur Ross introduced a fresh irritant into strained transatlantic ties Tuesday when he complained that the EU's new General Data Protection Regulation (GDPR), which took effect last week, will prompt major changes in American companies' responsibilities to protect consumers' privacy.
Commerce Secretary Wilbur Ross. Photo / AP
"GDPR's implementation could significantly interrupt transatlantic cooperation and create unnecessary barriers to trade, not only for the US but for everyone outside the EU," Ross wrote in an op-ed for the Financial Times. "We do not have a clear understanding of what is required to comply."
The Commerce secretary's broadside comes as the US and EU are embroiled in several contentious disputes. On Saturday, the EU's exemption from US steel and aluminum tariffs expires, and despite repeated pleas from European officials, the administration has given no sign it plans to grant an extension.
Trump also recently threatened to impose tariffs on imported automobiles, which would hit Germany, Europe's largest economy, especially hard. And European companies will be affected by the reimposition of US sanctions on Iran, Treasury Secretary Steven Mnuchin told Congress last week.
As those sanctions - designed to isolate Iran's banks and weaken its economy - are implemented this summer, European companies will face a choice between trading with Iranian customers or enjoying access to the US financial system.
"European companies will scream and that will be a bigger crisis than the steel tariffs," said William Reinsch, a senior adviser at the Center for Strategic and International Studies.
"It's a struggle of will, and it's a struggle of law."
The commercial stakes are enormous. American businesses last year exported US$283b of goods to the EU, more than twice the total they shipped to China, while customers in the US purchased nearly US$435b in products from European companies.
Heightened tensions with Europe find the administration already engaged in fights with other major US trading partners.
Trump Tuesday threatened China with tariffs on US$50b in products and investment restrictions ahead of Ross's scheduled arrival in Beijing Sunday for the resumption of trade talks. US officials also continue to plug away at efforts to negotiate a new North American trade deal, though those negotiations now appear likely to stretch into 2019.
A worker loads steel products onto a vehicle at a steel market in Fuyang in central China's Anhui province. Photo / AP
Ross has had several discussions with EU Trade Commissioner Cecilia Malmstrom over the steel and aluminum tariffs. She told the European Parliament Wednesday that "realistically" it did not appear that Europe could escape new US trade restrictions.
The union's commercial relationship with the US "is becoming increasingly complex," she added, blaming the US for "unilateral initiatives that are undermining the multilateral trading system."
US business groups want the administration to lift the tariff threat. Myron Brilliant, executive vice president of the US Chamber of Commerce, said to do otherwise risks "alienating" US allies and boomeranging on the US economy.
"Such a move would hit American manufacturers with higher costs, slow the growth of the US construction sector, and put the brakes on job creation in both of these key industries," Brilliant said in a statement. "US steel prices are already nearly 50 per cent higher than those in Europe or China."
Talks are snagged on the EU's refusal to negotiate over the administration's demand for limits on metals shipments to the US without first receiving a permanent exemption.
European officials have said they are willing to talk about stepped-up energy trade, regulatory cooperation, market openings for industrial products including cars and World Trade Organization reform- but only if the US stops threatening tariffs.
Ross, meanwhile, has complained that "it's only the EU that is insisting we can't negotiate if there are tariffs," noting that Chinese companies are paying the steel and aluminum levies while trade talks continue.
Trump's habit of negotiating by making tough opening demands only to quickly give ground, as he did by granting exemptions covering two-thirds of US steel imports, may be stiffening the Europeans' spines.
"It pays to stand up to this administration," said Edward Alden, senior fellow at the Council on Foreign Relations. "I don't see Europe being willing to make big concessions to get trade peace."
The spat over Europe's new privacy rules has far-reaching implications. The regulations apply to all companies, not only data-hungry tech giants. The GDPR requires all firms that rely on consumers' private information to seek explicit permission every time they collect that data, while granting web users the ability to download a copy or have it deleted.
Companies that mishandle personal information could face penalties as high as 4 per cent of their annual global revenue.
President Donald Trump plans to announce as soon as Thursday the imposition of sweeping tariffs on steel and aluminum imports from Canada, Mexico, and the European Union. Photo / AP
Hours after GDPR took effect on Friday, privacy watchdogs filed complaints against companies like Facebook and Google in Ireland and Apple, Amazon and LinkedIn in France. In the US Commerce Department officials urged European regulators to hold off on enforcement until they clarify its implementation.
In recent days, EU officials said they had heard the Americans' concerns. "They recognise this will have impact for some companies," David O'Sullivan, EU ambassador to the United States, said in an interview.
"Obviously, with any piece of legislation that newly enters into force, we're aware there may be some issues with people getting used to how things work."
Europe's approach differs greatly from the United States, which does not have a federal consumer privacy law.
Privacy advocates, who hope to leverage the EU's new rules into a global standard, have pushed companies to apply stronger privacy protections to their users, even those that do not live on the continent, while urging regulators to mimic the EU's regulations.
Given the basket of trade issues that now divide the US and EU, the weeks ahead may witness a deepening divide.
"Trump is making a major blunder if he thinks the EU will buckle or not fight back when it comes to trade restraints," economist George Magnus, an associate at Oxford University, said in an email.
"There are two things the EU is good at ... It's nothing if not a sophisticated regulatory union, and it's very skilled and adept at framing trade strategies and fighting its corner."
