In addition to the ongoing political turmoil in both Italy and Spain, today’s trifecta of risks is completed by the threat that President Trump will impose metal tariffs on Canada, Mexico and EU, according to reports in Washington Post. Overnight, Commerce Secretary Wilbur Ross said that US steel and aluminum tariffs on EU are to be announced before markets open or after markets close today, while CNBC added that the US plan to impose steel and aluminum tariffs on Canada, Mexico, and EU is ‘99.9%’ done and expected to come later this morning.
BREAKING: US plan to impose steel and aluminum tariffs on Canada, Mexico, and EU is ‘99.9%’ done and expected to come later this morning, a source tells @EamonJavers. https://t.co/3JJf6upjgG pic.twitter.com/BtEOWbRmtA
— CNBC Now (@CNBCnow) May 31, 2018
https://platform.twitter.com/widgets.jsIt gets worse: according to Germany’s, Wirtschaftswoche, Trump told French President Macron that he would block German premium cars from entering the US market (prompting some to muse that Porsches might actually hold their values).
As a result, the European Union – which had hoped to avoid this outcome – is now bracing for Trump to open another front in his confrontation with the bloc, as the EU’s top negotiator prepares for the U.S. to impose either tariffs or quotas on metals imports from America’s closest allies. As a reminder, back in March Trump slapped 25% tariffs on imported steel and 10% on aluminum, but granted a reprieve to the EU, Canada and Mexico until June 1 for further talks to take place. Those talks have been unsuccessful it appears, even after EU Trade Commissioner Cecilia Malmstrom met with U.S. Commerce Secretary Wilbur Ross in Paris on Wednesday in a last-ditch attempt to reach a compromise.
Ahead of the meeting, Malmstrom said that she doesn’t think the EU will get a full reprieve from tariffs or quotas. “Hopefully we will be able to have a positive agenda with the U.S. side, with no tariffs or quotas,” she told the EU Parliament on Tuesday, a message she reiterated after her meeting with Ross.
“Realistically, however, we do not think we can hope for that.”
As Bloomberg adds, discussions may continue on Thursday, with trade ministers meeting in Paris for a World Trade Organization gathering, although it now appears that the White House has made up its mind.
Canadian Trade Minister Francois-Philippe Champagne said in an interview on Thursday that any duties on his country would be “unacceptable” and that they would work until the final deadline to find a solution.
“A full exemption — we are going to seek that until the last minute,” Champagne said in an interview in the French capital, adding that tariffs would create consequences on both sides with respect to consumer prices and the supply chain. “Obviously, we would respond to protect our workers and our industries, like people would expect us to do.”
So, courtesy of Bloomberg, here is what happens at midnight tonight, when the extension officially expires:
- The immediate imposition of a 25% levy on steel and 10% on aluminum exported to the U.S. The Wall Street Journal reported on Wednesday that this is Trump’s decision.
- Setting a soft quota level, after which the tariffs would kick in. The latest U.S proposal was for a quota set at 90% of last year’s exports, and was rejected by the EU, which seeks a threshold set at least at 100 percent of last year’s exports.
- Setting a hard quota after which European steel and aluminum exports would be completely banned.
How will Europe respond?
First, the EU has said it will lodge a complaint with the WTO and impose retaliatory tariffs on 2.8 billion euros ($3.3 billion) of American imports as soon as June 20.
And it’s not just Europe: Canada and Mexico, which have also been pushing for full exemptions, will likewise be swept under the tariff rug, with Canadian Foreign Minister Chrystia Freeland on Wednesday warning that the country would respond “appropriately” to any tariffs. Canada remains the biggest supplier of steel and aluminum to the U.S.
Ross criticized the EU decision not to discuss trade matters with the U.S. until the tariff dispute was resolved, or as French President Emmanuel Macron described it: “while there’s a gun pointed at our head.”
“There can be negotiations with or without tariffs in place — God knows there are plenty of tariffs the EU has in place on us so it’s not that you can’t talk just because there are tariffs,” Ross said. China, which had levies imposed on it in March, “has not used that as an excuse not to negotiate,” Ross said. “It’s only the EU that’s insisting we can’t negotiate if there are tariffs.”