The EU threatens to tax Harley Davidsons and bourbon

The EU threatens to tax Harley Davidsons and BOURBON while China blasts US ‘protectionism’ over steel tariffs as Juncker welcomes the Chinese foreign minister to Brussels

  • Chinese foreign minister Wang Yi arrived in Brussels for trade talks on Friday 
  • Yi called on all countries to oppose ‘trade and investment protectionism’
  • He spoke as the EU prepares to slap America with tariffs on ‘iconic’ products after Trump imposed steep taxes on aluminium and steel
  • French President Emmanuel Macron has told Trump the tariffs are ‘a mistake’ 

EU chief Jean Claude Juncker today met the Chinese foreign minister as Brussels prepares retaliation for new US trade tariffs, and Beijing blasts Trump for ‘protectionism’.

The Trump administration yesterday announced a 25% tariff on steel imports 11% tariff on aluminium imports. 

It chose not to exempt Canada and the European Union – the largest sources of foreign aluminum and steel respectively – sparking angry criticism that the move risks a global trade war.

The EU has threatened to retaliate with tariffs on ‘symbolic’ US products such as Harley-Davidson motorcycles, Levis jeans, cranberries and bourbon whiskey.

While many countries share U.S. frustration over Chinese trade and economic practices, critics say Trump risks a global trade war by alienating the European Union, Canada and Mexico with its new tariffs. 

Jean Claude Junker and Chinese Foreign Minister Wang Yi today. Yang warned Washington to abide its commitments to avoid a separate US-China trade war after the US announced a 25% tariff on steel imports 11% tariff on aluminium imports 

French President Emmanuel Macron (pictured in Paris on Thursday) said he spoke with Trump to warn that the tariffs are illegal and a ‘mistake’, while pledging a ‘firm’ response

Complaints against Beijing include the rampant theft of intellectual property that has helped China become the world’s second-largest economy.  

The foreign ministry in Beijing said today: ‘All countries, especially the major economies, should resolutely oppose all forms of trade and investment protection.’

China and the US have threatened to impose tariffs on up to $200 billion worth of each other’s products, with US Treasury secretary Wilbur Ross due in Beijing on Friday for talks aimed at avoiding a trade war.

EU foreign policy chief Federica Mogherini on Friday said the bloc was not in a trade war with anyone but would defend its interests, hours after the US slapped punishing metals tariffs on Europe and other close allies.

‘The European Union is not at war with anyone… the EU is a peace project, including on trade,’ Mogherini said at a joint press conference in Brussels with the visiting Chinese Foreign Minister Wang Yi.

‘We believe in global free fair trade and we will continue to do so,’ Mogherini told reporters. ‘Having said that, clearly the EU has to defend its interests.’

Meanwhile a spokesman for French President Emmanuel Macron said he spoke with President Trump on Thursday after the tariffs were imposed.

Trump’s tariffs explained: What are they, how has the world reacted and what are the implications for Britain and global trade? 

Donald Trump’s administration last night imposed new trade tariffs on steel and aluminium imports into the US on the EU, Canada and Mexico.

Here we explain all the key issues and the implications at stake.

What has Donald Trump’s government done?

The US government has announced it will begin imposing steel and aluminium tariffs on US allies Canada, Mexico and the European Union.

Canada, Mexico and the EU together exported around £17billion worth of steel and aluminium to the US in 2017, equating to nearly half of the total steel and aluminium imports last year.

New tariffs: Donald Trump’s government has imposed new trade tariffs on steel and aluminium imports into the US from the EU, Canada and Mexico

What does ‘imposing a trade tariff’ really mean?

That any steel and aluminium imports from the EU, Canada and Mexico to the US will be slapped with a 25 per cent and 10 per cent tax respectively.

The tariffs will hit a wide range of products, including plated steel, slabs, coil and rolls of aluminium, all of which are used extensively within the US manufacturing, oil and construction sectors. 

When do the new tariffs take effect?

The new tariffs imposed on Canada, Mexico and the EU took effect at midnight on Thursday 31 May. 

Why has Trump done this?

Trade played a major role in Trump’s presidential campaign back in 2016. During that campaign, Trump blamed unfair global trade deals on job losses within the US.

Big business: Canada, Mexico and the EU together exported around £17billion worth of steel and aluminium to the US in 2017

Since 2000, 50,000 jobs have been lost in the steel industry and 40,000 in the aluminium factories. 

Speaking at a metals recycling facility in Monessen, Pennsylvania, in June 2016, Trump said: ‘We tax and regulate and restrict our companies to death and then we allow foreign countries that cheat to export their goods to us tax-free. How stupid is this? How could it happen? How stupid is this?’.

He added: ‘We are going to put American steel and aluminium back into the backbone of our country.’ 

During the speech, Trump warned he would impose taxes and tariffs on foreign countries importing their products into the US.

Before this week, what tariffs had Trump already introduced?

On 1 March, Trump announced he was introducing a 25 per cent charge on steel imports and a 10 per cent charge on aluminium imports. In total, the tariffs would have an impact on around $48billion worth of trade.

By imposing the tariffs, Trump was primarily taking aim at China, which had been dubbed by the president as the ‘bad guy’ of global trade.

The tariffs were supposed to come into force the following week. 

After a backlash, Trump then initially suspended the tariffs for Argentina, Australia, Brazil, South Korea, Canada, Mexico and the EU from the tariffs, pending further negotiations.

If those negotiations did not make sufficient progress in Trump’s eyes, then the tariffs would be imposed at a later date. This is exactly what ended up happening.

Airing his views: Trade played a major role in Trump’s presidential campaign back in 2016

US Commerce Secretary Wilbur Ross has said talks with the EU, Canada and Mexico had not made enough progress to warrant a further reprieve, meaning the geographical reach of the tariffs has been extended.

What are the implications for Britain?

Around 7 per cent of the UK’s steel output, 350,000 tonnes, was exported to the US last year. For this reason, the industry fears the tariffs could cause serious damage. 

The UK’s steel sector remains a major employer, despite having shrunk significantly in recent decades.

Around 4,000 people are employed at Tata’s giant Port Talbot steelworks in south Wales. British Steel, which in its current form was founded in 2016 from assets acquired from Tata by Greybull Capita and has production sites in Scunthorpe, Skinningrove and Teesside.

Industry: Around 7 per cent of the UK’s steel output, 350,000 tonnes, was exported to the US last year

While accounting for less than 1 per cent of economic output, the steel sector is still regarded as strategically important for both manufacturing and defence. 

Adam Marshall, Director General of the British Chambers of Commerce, said: ‘It is hugely disappointing that the US government has chosen to push ahead with these tariffs, which will hurt companies and communities in many areas of the UK, as well as their customers in the US.

‘The UK government must reach out to and support the many supply chain businesses that face becoming the “collateral damage” of the Trump administration’s protectionist push. British ministers must also work hand in hand with the EU to avoid any further escalation, and to find a long-term solution.

As the UK leaves the EU, the American government’s decision to impose punitive tariffs is a helpful reminder that self-interest looms large in trade negotiations. Ministers should reflect on this carefully before they pursue any future trade deal between the UK and the USA.’  

How has Britain’s government reacted to the announcement so far?  

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.

UK reaction: A government spokesman said they were ‘deeply disappointed’ by 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.’

UK International Trade Secretary Liam Fox said the levy on steel was ‘patently absurd’.

He added: ‘It would be a great pity if we ended up in a tit-for-tat trade dispute with our closest allies.’

Barry Gardiner, of the Labour party, said the measures were ‘based on a lie’, adding the UK should not be ‘bullied by the president… we believe in a rules-based system and Trump doesn’t.’

It remains unclear whether the tariffs will have any implications for a future trade deal with the US after Brexit.

How has the EU reacted so far?

European Commission president Jean-Claude Juncker said he plans to take the US to the World Trade Organization over the American tariffs.

Fierce reaction: Juncker branded the tariffs ‘totally unacceptable’

Juncker branded the tariffs ‘totally unacceptable.’.

The EU has also issued a 10-page list of tariffs on US goods ranging from Harley-Davidson motorcycles to food goods.

What is the reaction from Canada and Mexico?

Canadian prime minister Justin Trudeau said the US’s move was ‘totally unacceptable’ and rejected the claim that his country posed a national security threat to America.

In response, Canada plans to impose tariffs of up to 25 per cent on roughly $13billion worth of US exports from 1 July.

Mexican Foreign Minister Luis Videgaray said his country was planning new duties for imports of steel, pork, apples, grapes, blueberries and cheese from the US. 

How have the markets reacted?

With fears over a potential trade war looming large, in the immediate aftermath of the announcement, the Dow Jones dipped by around 1 per cent, France’s CAC lost half a per cent and Germany’s DAX fell by 1.4 per cent. In the UK, the FTSE 100 is currently up 0.66 per cent to 7,728.81. 

Will the tariffs end up being a success for the US?

Reaction on exactly how the tariffs will end up affecting the US in the long-run is mixed.

Professor Inderjeet Parmar, of the University of London, said: ‘The impact of tariffs on steel and aluminium on US jobs is minimal as it will increase prices for other goods that use those metals like cars etc. and prices will go up in the US.’

He added: ‘The US will want to open up UK financial and health services to US firms and prices once EU regulations on price and safety are gone. But the EU will not want those regulations to be abolished by the UK and will expect any deal with the UK to retain health and other standards in return for a deal with the EU.

‘Generally, this is a big headache but not a war; it will place May in a tough position as the US is so close of an ally.”

Professor David Collins, Professor of International Economic Law at City, of the University of London, said: ‘It is very difficult to speculate how President Trump thinks, and his tweets are not necessarily a good indication, but presumably he expects that in the longer term the steel and aluminium tariffs will benefit the US economy, even if in the short term there are problems in terms of higher costs to consumers and manufacturers.

‘I suspect that he envisions the tariffs as a tactical manoeuvre to gain concessions from Canada and Mexico in NAFTA negotiations and possibly to secure the EU’s support for blocking China’s role in the over-supply of steel on global markets.’

What is China’s role in all this?

China’s position in the world of global trade plays a major role in the US government’s latest tariff introductions.

In his presidential campaign, Trump outlined his plans for a crackdown on China, accusing the country of flooding the global market with cheap metals.

On a historical level, it is China, as well as Russia, that have been the US’s main ‘enemies’. By imposing the tariffs on the EU, Canada and Mexico, the president has, for the time being, taken the focus and heat away from China. 

Last year, Trump instructed the US Trade Representative to investigate Chinese violations of intellectual property rights, invoking Section 301 of the Trade Act of 1974. 

On 22 March, the USTR concluded that China had implemented unreasonable policies and unfair practices to acquire foreign technologies.

Trump has since announced measures to penalise China and hit its global trade operations. But for the moment, Trump has imposed more trade tariffs on his supposed allies than China.

The US has said it plans to impose 25 per cent tariffs on $50billion worth of Chinese imports ‘shortly’ after mid-June.

China has retaliated to Trump’s stance by implementing retaliatory tariffs of up to 25 per cent on $3billion worth of food imports from the US, raising uncertainty over the possibility of a trade war between the two countries.

 

The EU has threatened to retaliate with tariffs on ‘symbolic’ US products such as Harley-Davidson motorcycles, cranberries and bourbon whiskey.

European Commission President Jean-Claude Juncker speaks in Brussels after US tariffs were imposed. EU taxes could come into force from June 20 on an initial list of American products, with a second list taking effect in March 2021 subject to approval by member states

Macron warned Trump that the tariffs are illegal and a ‘mistake’ while pledging a  ‘firm’ and ‘proportionate’ response in line with World Trade Organization rules.

He also raised the spectre of a new world war caused by ‘economic nationalism’, saying: ‘This is exactly what happened in the 1930s.’

Britain’s trade minister Francis Maude described the tariffs as ‘stupid’ to the BBC, adding: ‘Any government that embarks on a protectionist path inflicts the most damage on itself.’ 

Europe has said it will launch a challenge to America’s tariffs at the World Trade Organization as well as taxing $3.3billion of US exports to ‘rebalance’ the books. 

This rebalancing could enter force from June 20, with tariffs on a second list of products from March 2021 subject to agreement by Europe’s 28 member states. 

Canadian Prime Minister Justin Trudeau was also among the first world leaders to hit back at Trump, calling the tariffs ‘an affront’. 

‘Let me be clear: These tariffs are totally unacceptable,’ Trudeau said.

‘Canadians have served alongside Americans in two world wars and in Korea. From the beaches of Normandy to the mountains of Afghanistan, we have fought and died together.’ 

The bloc now needs to determine how to deal with the Trump administration, particularly after he opened an investigation into cars and trucks that could lead to similar tariffs as now on metals.

Germany has tended to favour a more conciliatory approach, while others believe, after weeks of metal tariffs talks, that Trump will only respect a hard line.

Germany has more at stake. In 2017, German exports to the United States reached 112billion euros, more than twice that of the next biggest EU country, Britain, and more than triple that of France, according to the Eurostat statistics office.

The steel and aluminium tariffs were imposed as US Treasury secretary Wilbur Ross was due in Beijing for talks over potential tariffs on Chinese products

EU leaders had agreed to offer Washington the prospect of discussions to open their markets wider, with a potential reduction of existing tariffs on industrial products such as cars, and cooperation on energy and regulation.

The proviso was that Trump grant the European Union a permanent exemption to the aluminium and steel tariffs, which he has failed to do. 

US Treasury secretary Wilbur Ross is meeting a Chinese delegation in Washington at the weekend and is expected to press China to commit to buying more U.S. agriculture, energy, and other products.

Mogherini said the EU had prepared its counter-measures against the US, including a tit-for-tat threat of duties on a whole range of products including cranberries and bourbon whiskey.

She said the EU will also launch a dispute settlement procedure against the United States at the World Trade Organization, a legal process that could take years.

“This doesn’t mean the United States are not our closest partners and friends. Allies they (will) stay,” she said after a first round of talks with China’s Wang.

“We work very closely with the US on most issues from security .. to international foreign policy issues and this will continue to be the case,” she said.

In a veiled warning, Wang warned Washington to abide its commitments to avoid a separate US-China trade war as a 50-strong US delegation held talks in Beijing.

“We always honour our words and we expect that our partners keep their word as well,” Wang said.

The US delegation is laying the groundwork for a weekend visit by Commerce Secretary Wilbur Ross to finalise a fragile trade truce announced earlier in May.

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