Trump Imposes Tariffs on Previously Excluded Allies
Another week, another threat of a trade war. Today, Commerce Secretary Wilbur Ross announced that the U.S. would be imposing tariffs on metals from Canada, Mexico, and the European Union. This comes after the president previously issued similar tariffs on other countries but had excluded those allies. These tariffs include 25% on imported steel as well as 10% on imported aluminum and will go into effect at midnight.
As you’d expect, leaders from the affected countries are already speaking out against the move and threatening to retaliate. According to the Associated Press, French finance minister Bruno Le Maire called the decision to impose the tariffs “unjustified, unjustifiable, and dangerous.” He went on to say, “Global trade is not a ‘gunfight at the OK Corral.’ It’s not about who attacks whom, and then wait and see who is still standing at the end.” Meanwhile German Chancellor Angela Merkel suggested the U.S. should brace for a European response, saying the E.U. “will respond in an intelligent, decisive, and joint way.” Finally Mexico announced it was planning to impose tariffs on various American imports including pork, fruit, flat steel, and more.
In announcing the tariff implementations, Ross said the decision to end the exclusions for Mexico and Canada was made due to discussions over the North American Free Trade Agreement (NAFTA) dragging on “longer than we had hoped.” Similarly Ross noted that, while some progress has been made on the E.U. front, their exemption would also be canceled. European Commissioner for Trade Cecilia Malmstrom acknowledged these efforts in a statement, saying the E.U “did everything to avoid this outcome.” However she went on to blast the way talks were handled, saying “The U.S. has sought to use the threat of trade restrictions as leverage to obtain concessions from the E.U. This is not the way we do business, and certainly not between long-standing partners, friends, and allies.”
Following the announcement by Ross, the market had a somewhat mixed reaction. Naturally stocks for American metal companies saw gains, with Century Aluminium up 3.2% at press time and U.S. Steel up 2.3%. However the Dow is down more than 200 points, likely due to fears over the trade war that may be brewing.
While the revocation of tariffs exemptions for the E.U., Mexico, and Canada were the big headline today, the White House also confirmed it was moving forward with a previously announced plan to impose $50 billion in tariffs on various Chinese goods. Even though it seems like tariffs have been the talk of Wall Street for months now, these announcements and the recent news that the U.S. is exploring a possible tax on imported autos have brought trade war fears to a new high. As a result both investors and everyday consumers should be bracing for blowback, hits to the market, and potentially higher prices on certain items.