Donald Trump’s administration has slapped tariffs on steel and aluminium imports from the EU, Canada and Mexico.
What is affected?
The US commerce secretary Wilbur Ross says there will a 25% tariff (basically a tax) on steel and 10% on aluminium brought into the US from the EU, taking effect on 1 June.
The tariffs were actually announced in March but the EU (along with some other US allies) was given an exemption. This exemption was due to expire on 1 June.
What is at stake?
Gareth Stace, director of industry group UK Steel, told Sky News’s Ian King Live programme that the UK exports around £360m in steel to the US per year, 10% of the industry’s total exports.
For the EU, the measures will affect exports that were worth €6.4bn (£5.6bn) in 2017.
The potential effect on jobs is not yet clear.
What has been the UK reaction?
A government spokesman said they were “deeply disappointed” and that the UK and other EU countries, being close allies of the US, had not been “permanently and fully exempted” from the tariffs.
He added: “We will continue to work closely with the EU and US administration to achieve a permanent exemption, and to ensure that UK workers are protected and safeguarded.”
It is not known if the move has any implications for a trade deal with the US post-Brexit.
What will the EU do next?
The EU, which says the tariffs are unfair and protectionist, will take its case to the World Trade Organisation on 1 June (the day the tariffs take effect).
It had already revealed plans for “re-balancing” – placing tariffs on some US products (orange juice, denim, motorbikes and peanut butter were among some of the products mentioned), the level of which will “reflect the damage caused by the new US trade restrictions”.
Officials will also be trying to protect the EU market from a flood of extra steel that might not end up being exported as a result of the restrictions placed on the US market.
What do those in the steel industry say?
UK Steel’s Gareth Stace said Donald Trump’s move has “started a damaging trade war”.
He added: “It is difficult to see what good can come of these tariffs. US steel consumers are already reporting price increases and supply chain disruption and with some half billion dollars of steel exported from the UK to US last year, UK steel producers are going to be hit hard.
“As stated time and time again, the only sustainable solution to the root cause of the issue, global overcapacity in steel production, is multilateral discussions and action through established international channels.”
What about others affected, such as Canada and Mexico?
Mexico said it would hit back with levies on US imports such as pork bellies, apples, grapes, cheeses and flat steel.
Canada’s foreign minister Chrystia Freeland said before the US announcement: “The government is absolutely prepared to and will defend Canadian industries and Canadian jobs. We will respond appropriately.”
Canada has indeed hit back, announcing retaliatory duties on American goods worth up to Can$16.6 billion (USD$12.8 billion).
Canadian Prime Minister Justin Trudeau said the US tariffs were “totally unacceptable.”
“These tariffs are an affront to the long standing security partnership between Canada and the United States, and in particular, an affront to the thousands of Canadians who have fought and died alongside their American brothers in arms,” he said, noting the US national security justification for its measures.
Brazil, Argentina and Australia have agreed to limit steel shipments to the US in exchange for being spared the tariffs, the Commerce Department said. Tariffs remain on imports from Japan.
Why has Trump done this?
The US President says the reason is national security and, being an aggressive and confrontational move, it is perhaps not unexpected.
Donald Trump campaigned for the presidency on the promise of restoring jobs to the decaying steel towns across America’s rust belt – his core support area. Since 2000, 50,000 jobs have been lost in the steel industry and 40,000 in the aluminium factories.
And, for the US, there is a lot at stake – the White House says the country is the world’s largest importer of steel, bringing in nearly four times as much as it exports.
But will tariffs help?
Tariffs make imported goods more expensive and local products cheaper in comparison. And, meanwhile, the government gets a bit more money. But, long term, it’s more complicated.
Because imported goods are more expensive, there is less competition and less incentive for domestic producers to reduce their prices.
Tariffs also reduce efficiency, meaning that companies that would be left behind by a more competitive market are able to remain in business.
In general, it can mean higher prices and lower quality products for the consumer.
Also, in this case, US farmers could be hit hard – EU retaliation is likely to focus on products important to them.
From a diplomatic point of view, the US move goes further towards isolating it from its closest friends in the world, at a time when it needs those friends on issues such as North Korea, Iran and the Middle East.
How have markets reacted?
Financial markets dipped after the announcement, not so much due to the tariffs but fears of the trade war they might spark.
The Dow Jones industrial average was down over 1%, the FTSE closed 0.15% down, France’s CAC lost half a percent and Germany’s DAX shed 1.4%.
Is this a trade war?
It isn’t strictly a trade war until the other side has retaliated.
On Thursday night (UK time), that retaliation came from Canada, which hit back with C$16.6bn (£9.6bn) in tariffs on the US.