Business uncertainty rises as US grants only temporary exception to EU for steel and aluminium tariffs

President Donald J. Trump and French President Emmanuel Macron walk together to the Oval Office at the White House, Tuesday, April 24, 2018, in Washington, D.C.
Official White House Photo by Shealah Craighead

Trump’s America first decided last Monday to prolong negotiations on steel and aluminium tariffs with Canada, the EU and Mexico till June 1. This announcement was made just a few hours before the temporary exception expires preventing retaliation and massive impact on the relationship between the U.S., EU, Canada and Mexico.

However, the EU officials expressed their dissatisfaction as the U.S. didn’t grant permanent exception on steel and aluminium tariffs while managed to reach an agreement with Argentina, Brazil and Australia.

Background

Last March President Donald Trump imposed worldwide tariffs of 25% on U.S. imports of steel and 10% on aluminium. China was among the countries not to be exempted and responded with retaliation measures on some American imports. South Korea though was given an indefinite exemption in exchange of a 30% cut in its steel exports to the Trump’s America first. The EU, Canada and Mexico took a temporary exemption till May 1 and negotiations are ongoing till now.

EU welcomes Washington decision but wants permanent exception

The last-minute decision of President Trump to postpone tariffs on steel and aluminium till the end of the month sounded both as a relief but also as an extra stress to the ears of the EU officials. More specifically, the European Commission said: “The U.S. decision prolongs market uncertainty, which is already affecting business decisions. The EU should be fully and permanently exempted from these measures, as they cannot be justified on the grounds of national security”.

According to the EC, EU Commissioner Cecilia Malmstrom will continue negotiations with U.S counterparts, Commerce Secretary Wilbur Ross and Trade Representative Robert Lighthizer. But in case the Trump’s administration imposes tariffs on steel imports worth of 6,4 billion euros, then the EU will respond by setting levies on 2.8 billion euros of American exports including peanut butter and denim jeans.

It must be highlighted that the EU is together with Canada the biggest steel exporter to the U.S. In addition, EU Commissioner Günther Oettinger stated on the issue that “Germany’s growing trade surplus with the US is because America does not have anything attractive to import. There are just more products from the EU that are attractive for the US than vice versa.” The latter statement came after President Trump announced its temporary prolongation for the bloc.

Germany and France are among the main EU countries to support the permanent exemption. In detail, the German Economy Minister Peter Altmaier stated that: “I am firmly convinced that in the interests of jobs in Germany, in Europe and in the USA, we need a long-term provision and that raising tariffs is the wrong way. We need fewer, not more duties in global trade.”  What is more, the Finance Minister of France said that overcapacity in the steel and aluminium sectors is a fact but a permanent exemption should be granted to the EU and this should be dealt through negotiations where “fast and appropriate solutions” should be adopted.

The UK expressed its will to work towards a permanent exemption. In detail, it was mentioned by a UK government spokesperson that: “We remain concerned about the impact of these tariffs on global trade and will continue to work with the EU on a multilateral solution to the global problem of overcapacity, as well as to manage the impact on domestic markets”.

EU businesses reaction

The business sector of the Old Continent has expressed its concerns about the developments on the fear of imposing tariffs on steel and aluminium by the U.S. The Confederation of European Business characterized the recent extension as positive but clarified that companies need more certainty. What is more, the European steel association Eurofer acknowledged Monday’s U.S. decision but noted that there will be an increase in imports.

All in all, it is certain that the trade war between the U.S. and the rest of the world will continue untill America takes advantage of the “great potential in addressing the trade disparities with other countries” as U.S. President said. Will the Washington manage to benefit from the trade negotiations or shall we anticipate another temporary exception at the end of May?

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