Following intense lobbying by French President Emmanuel Macron and German Chancellor Angela Merkel — plus, it must be said, the whole European steel industry and many consumers in the U.S. — U.S. President Donald Trump has announced a delay in the imposition of steel and aluminum tariffs on Canada, Mexico and, crucially, the European Union until June 1.
The temporary exemptions from tariffs on these countries were set to expire today. At the same time, agreements for permanent exemptions for Argentina, Australia and Brazil have been made.
According to The Telegraph, the U.S. granted temporary relief to European producers from 25% tariffs on steel and 10% levies on aluminium only up to May 1, but has now extended by a further 30 days while it tries to ring concessions out of its partners in NAFTA and with the E.U.
Specifically, the article suggests automobiles are high on the list of things on which Trump wants to see movement. The E.U. charges 10% import duty on U.S. cars but currently incurs only 2.5% on the import of E.U.-made cars into the U.S.
Tariffs would hit steelmakers this side of the Atlantic hard, the article states, with the industry only just recovering from the 2015 crisis, which cost tens of thousands of jobs. Closure of the U.S. market creates the potential for a “double whammy” to the European industry. Not only is America a major market for Germany, the U.K. and Italy, but Chinese producers are likely to flood Europe with excess output, which was a major cause of the crisis of three years ago.
China remains broadly the U.S. main target, but the steel and aluminium tariffs are part of a wider bid to renegotiate the terms of trade with a number of countries, from close to home with NAFTA to far-flung producers on the other side of the globe.
The president seems to have a bone to pick with most of them. The threat of sanctions is a blunt but effective tool to bring countries to the negotiating table. As a tactic, it does seem to have some merit.
No breakthroughs have been made, but many discussions are now ongoing that were being avoided a year ago. China’s steel imports have dwindled markedly into the U.S. over recent years, but aluminum remains significant. The threat of such has already drawn the ire of Beijing, but also the willingness to make conciliatory gestures, such as freeing up the domestic market for foreign investments.
But on two key trade demands, The New York Times reports Beijing is not willing to give ground.
Firstly, the president’s headline-grabbing $100 billion cut in the U.S.’s trade deficit with China and probably even more sensitive is a curb on a $300 billion Chinese plan to invest in advanced tech like A.I. and electric cars. China will almost certainly sweat it out if the president sticks to demands to row back on what China sees as its strategic future.
The row with Europe is far from settled. The postponement has only bought 30 days, so the pressure is on to find a solution.
Europe has more to lose than the U.S., so you have to think some form of settlement will be found that will, to some extent, meet the president’s objectives.
If not, the pain Europe’s steel industry has gone through in the last 10 years will be nothing compared to what is to come.