US fires first shot in trade war with allies

International Desk: The US has fired the opening shot in a trade war with three of its biggest trading partners by deciding to begin levying tariffs on imports of steel and aluminium from the EU, Canada and Mexico.

The move to take action against longstanding US allies on national security grounds sets the stage for a round of tit-for-tat tariffs among some of the world’s largest economies just days ahead of a meeting of G7 leaders in Canada.

The EU has said for months that it would retaliate against any US tariffs  and Jean-Claude Juncker, the European Commission president, said on Thursday that the bloc would go ahead with plans to impose its own duties on US products such as bourbon, motorcycles and peanut butter.

“This is a bad day for world trade,” Mr Juncker said.

Ahead of the announcement, France’s finance minister warned the EU would have no choice but to “enter a trade war” against the US if President Donald Trump imposed the new metals tariffs. “Our US friends must know that if they were to take aggressive actions against Europe, Europe would not be without reaction,” said Bruno Le Maire, after meeting Wilbur Ross, US commerce secretary, in Paris.

Justin Trudeau, Canada’s prime minister, called the new tariffs “totally unacceptable” and made clear his offence at being labelled a national security threat to the US.

“For 150 years, Canada has been America’s most steadfast ally . . . From the beaches of Normandy to the mountains of Afghanistan, we have fought and died together,” he said. “That Canada could be considered a national security threat to the United States is inconceivable.”

Canada said it would target $12.8bn in imports from the US for retaliation including aluminium and steel but also everyday consumer goods such as dishwasher detergent.

Mexico also said it would impose its own retaliatory tariffs on a wide range of products from US steel to pork, sausages, and fruit such as apples, grapes and blueberries.

“This marks a significant escalation [by the US and] the first big shot in the long-feared trade war,” said Edward Alden, a senior fellow at the Council on Foreign Relations in Washington.

The move by the US and swift reaction from allies came after Mr Ross said negotiations with the EU in recent months had gone nowhere and that discussions with Canada and Mexico to update the North American Free Trade Agreement were taking too long.

The duties of 25 per cent on steel and 10 per cent on aluminium, which Washington claims are necessary on national security grounds, were first announced in March as part of a crackdown by the US on China and its flooding of cheap metals into global markets.

But Thursday’s events highlighted how Mr Trump’s efforts to take a harder line on China have ended up damaging even larger economic relationships with traditional allies such as the EU and its Nafta partners. Along with trade talks between the US and China in Beijing this weekend, they are likely to cast a shadow over talks between Mr Trump and fellow G7 leaders next week.
 

Source: Agencies
 

risingbd/Dhaka/June 01, 2018/A K Azad