Ready for a Trade Battle: Trump's New Steel Tariff Hike: The Next Step Towards Trade Wars?
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Trump's Fresh Tariff Declaration: Possible Status Quo Disruptor? - Is Trump's freshly declared steel tariff increase going over the line?
Just when the EU was hoping to dodge the escalating trade conflict with the US, President Donald Trump has ramped up the stakes. He announced a staggering 50% hike in the existing tariffs on steel and aluminum imports, effective immediately during ongoing negotiations. Will a full-blown trade war now be a certainty? Here's a lowdown:
Why did this announcement catch us off guard?
Primarily because there had been indications that even Trump himself might have been open to a mutually beneficial resolution to the trade war. After Trump's threat to hit the EU with a new round of hefty tariffs, he agreed for the first time to a summit with EU Commission President Ursula von der Leyen last weekend. After the conversation, Trump shelved the threat and indicated his desire for talks to continue until July 9. The EU Commission was seemingly optimistic about this forward momentum.
Since then, there have been several phone conversations between the trade negotiators of both parties. Most recently, EU Trade Commissioner Maros Sefcovic spoke with US Trade Representative Howard Lutnick on Friday.
How is the EU reacting to the new announcement?
The EU Commission, responsible for the tariff negotiations, expressed disappointment on Saturday. The increase in tariffs, according to a spokesperson, runs counter to efforts aimed at reaching a compromise via negotiations. The EU is ready to take action and these steps could be implemented before July ends if necessary.
What might a prompt EU retaliation look like?
Governments of EU member states had already green-lit initial counter-tariffs ranging from 10 to 25% against Trump's tariff orders back in April. These could be enforced immediately, affecting companies based in the US such as fashion brands producing jeans, motorbike manufacturers, beef producers, and citrus fruit exporters. Further measures are under consideration. Additional duties on industrial and agricultural products such as automobiles, sweet potatoes, and whiskey are being looked into.
What does Trump hope to achieve with the tariffs?
Trump aims to correct perceived trade imbalances and safeguard domestic production in the US with the tariffs. The additional fees for imports, he claimed in a speech to a steel manufacturing plant in Pennsylvania on Friday, would bolster the US steel industry.
The president of the American Iron and Steel Institute, Kevin Dempsey, supports the hike in tariffs on steel imports. He noted that Chinese steel exports have more than doubled since 2020. Given these challenging global market conditions, "this tariff measure will help prevent another wave of imports that would harm American steel producers and their jobs," Dempsey said. The tariff revenue will also help finance Trump's costly tax cuts, at least partially. Formally, the existing tariffs on steel, aluminum, and automobile imports are presented as a security measure meant to protect national interests. However, the EU considers this approach and justification to be incompatible with World Trade Organization (WTO) rules.
What repercussions could the tariffs have for the EU?
The European steel industry feared earlier this year that it would be compelled to close more production facilities and shed jobs due to the new US tariffs. The US was the second-largest market for European steel manufacturers at that time, accounting for 16% of total EU steel exports, according to the European Steel Association (Eurofer).
Germany's largest steel manufacturer, Thyssenkrupp Steel, maintained a calm perspective at the time. The company based in Essen stressed that its primary market for steel remains Europe. Exports of steel products to the US were insignificant, it stated.
Can the EU meet Trump halfway on steel?
In theory, the EU and the US could partner to address colossal overcapacities caused by massive subsidies. These are attributed primarily to China. European steel producers are among those severely affected by dumping prices. In response, the European Commission has established a defense mechanism for the domestic steel industry. This system was recently strengthened during the spring.
- EU
- Trade War
- Steel
- Trade Negotiations
- Donald Trump
- ** countermeasures**
- US tariffs
- Trade Tensions
- Aluminum
- USA
- Tariff Escalation
- Trump Administration
- Tariff Hike
- disturbed negotiations
- Economic Uncertainty
Additional Insights:
In response to the US tariff hike, the EU has launched a public consultation to explore potential countermeasures against US tariffs on automotive, reciprocal, and aluminum products. This includes considering additional import duties on products like aircraft, automobiles, medical devices, IT equipment, and industrial machinery, which could impact €95 billion worth of US imports [4]. The EU is also contemplating targeting specific US exports such as scrap metals and chemicals, representing about €4.5 billion in EU exports [4]. The European Commission plans to respond assertively to the escalating trade tensions in order to safeguard its economic interests [2][3].
- The EU is preparing countermeasures to respond to the 50% hike in US steel and aluminum tariffs, potentially targeting US exports of aircraft, automobiles, medical devices, IT equipment, and industrial machinery, threatening €95 billion worth of imports.
- The escalating trade tensions between the EU and US, prompted by the tariff hike, could have significant repercussions for various industries such as finance, politics, general-news, employment policy, and community policy, as both parties readjust their economic strategies and negotiate agreements.
