The EU has promised to react “firmly and commensurately” to the restrictive measures announced on Thursday 1 March by the American President, Donald Trump, on imports to the US of steel and aluminium.
“The EU will react firmly and commensurately to defend our interests”, warned the President of the European Commission, Jean-Claude Juncker, following Trump’s announcement of his intentions to impose customs duty of 25% on imports of steel and 10% on imports of aluminium from Thursday of next week, without specifying which countries would be targeted.
Trump’s decision follows the investigation he commissioned in April 2017 which would give his administration, under a clause (‘section 232’) of the Trade Expansion Act of 1962, full powers over Congress to restrict imports that may call the security of the country into question.
At the end of this investigation, the American Trade Department suggested taxes or quotas under three different options to restrict imports of steel and aluminium to the US (see EUROPE 11964).
This initiative “appears to represent a blatant intervention to protect US domestic industry and not to be based on any national security justification (...). Instead of providing a solution, this move can only aggravate matters. We will not sit idly while our industry is hit with unfair measures that put thousands of European jobs at risk”, Juncker warned.
Hitting out at measures that will have a “negative impact on transatlantic relations and on global markets and will raise costs and reduce choice for US consumers of steel and aluminium, including industries that import these commodities”, the Commissioner for Trade, Cecilia Malmström, said that the EU would start consultations with the US in the framework of the WTO as soon as possible and that the Commission would follow the markets very closely so that if necessary, it can adopt safeguard measures that are compatible with WTO rules.
“The root cause of problems in these two sectors is global overcapacity caused by non-market-based production. This can only be addressed at the source and by working with the key countries involved. This go-it-alone action by the US will not help”, she added.
The Commission confirmed on Friday that it was working on three possible actions: consultations at the WTO with the US and involving other countries affected by the American measures; counter-measures; safeguard measures if certain steel products from third countries that would have been exported to the US are redirected to the EU.
As regards the countermeasures, the draft list of which will be discussed by the College of Commissioners on Wednesday 7 March, the Commission is considering duties to be imposed as follows: one third on steel products, one third on agricultural products and one third on other products, a source close to the dossier told us, but stressed that any reaction on the part of the EU would have to be compatible with WTO rules.
Media sources mooted the possibility that the EU would implement very specific reprisal measures on products from states that voted heavily for Trump, such as whiskey from Kentucky, oranges from Florida or Harley-Davidson motorbikes. These products could be included, but the list has not been finally decided upon, a Commission source told us.
In 2002, the EU threatened to impose targeted taxes on certain American products, when the Bush administration declared a ‘steel war’.
In the meantime, the Commission obtained the support of the European Parliament on Friday, where the heads of the EPP, S&D, ECR, ALDE, GUE/NGL and Greens/EFA political groups in the committee on international trade chaired by Bernd Lange (S&D, Germany) slammed Trump’s decision as “unacceptable and incompatible with WTO law” and called for a firm response.
“US trade protectionism will isolate a strategic partner and instead of creating growth and jobs will have the contrary effect”, they warned, assuring the Commission of its unstinting support to its “firm and immediate response by bringing forward WTO-compatible countermeasures against the United States to defend the interests of our citizens”, and calling for “mitigating measures”.
Trump’s threat has led to indignant reactions across the world from government and industry, who have highlighted the risk of a trade war.
With the shock at its height on Friday, Trump fired off a message on Twitter stating that “when a country (USA) is losing many billions of dollars on trade with virtually every country it does business with, trade wars are good, and easy to win”.
“The potential for escalation is real (…). A trade war is in no one’s interests”, warned the Director General of the WTO, Roberto Azevêdo. (Original version in French by Emmanuel Hagry)