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Opening shots fired in US-EU trade war

The first shots have been fired in a trade war with the US attacking allies on national security grounds with increased tariffs just days ahead of a meeting of G7 leaders in Canada. 

Published: June 1, 2018, 12:07 pm

    Washington

    Three of America’s biggest trading partners will see tariffs slapped on imports of steel and aluminium: the EU, Canada and Mexico. The 25 percent on steel and 10 percent on aluminium, are necessary on national security grounds, Washington says.

    Chad Bown, a senior fellow at the Peterson Institute for International Economics, said the tariffs were not aimed at China but at America’s friends. “This is primarily now only attacking our economic and military allies,” he said. 

    Total US trade with the EU was worth almost $720 billion last year compared to the $636 billion in US trade with China.

    Chinese over-production was the problem rather than European production, said Liam Fox, the British trade secretary, and the reasons given were “patently absurd”.

    The EU has said that it would retaliate against any US tariffs and on Thursday the bloc said it would move to impose duties on US products such as bourbon, motorcycles and peanut butter, The Financial Times reported.

    France’s finance minister said the EU had no choice but to “enter a trade war” called by President Donald Trump. “Our US friends must know that if they were to take aggressive actions against Europe, Europe would not be without reaction,” Bruno Le Maire commented to the media after meeting Wilbur Ross, US commerce secretary, in Paris.

    Justin Trudeau, Canada’s prime minister, expressed his outrage 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 could target $12.8bn in imports in response, including dishwasher detergent. Mexico could look to levy taxes on pork, sausages, and fruit such as apples, grapes and blueberries.

    EU trade commissioner Cecilia Malmstrom and Japan’s Hiroshige Seko have both warned that the US was putting the entire global trading system at risk with its auto move. “This would cause serious turmoil in the global market,” they warned.

    “If Trump comes up with anything close to 25 per cent tariffs on German cars, I would really see it as the end of the German-American trade relationship. Not a single car built in Germany and sold to the US would be sold at a profit,” an analyst at Evercore ISI, Arndt Ellinghorst told the FT.

    Adam Marshall, director-general of the British Chambers of Commerce, also called the news “hugely damaging”. He said governments should keep in mind that “US self-interest looms large in trade negotiations” when making deals with Americans.

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