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Trade Tensions Spike as Trump Puts Tariffs In Play

It appears the Trade War of 2018 is afoot.

Two days after President Trump announced plans to proceed with 25 percent tariffs on $50 billion in goods imported from China, the White House said it was moving ahead with tariffs on aluminum and steel imports from Canada, Mexico and the European Union.

Trump issued orders on Thursday that the U.S. was set to impose a 25 percent tariff on steel imports and a 10 percent tariff on aluminum imports from the European Union (EU), Canada and Mexico at midnight, ending a two-month exemption.

U.S. Commerce Secretary Wilbur Ross told reporters that talks with the EU had failed to reach a satisfactory agreement to convince Washington to continue the exemption from the tariffs imposed in March. He said negotiations with Canada and Mexico to revise the North American Free Trade Agreement are “taking longer than we had hoped” and there is no “precise date” for concluding them, so their exemption also will be removed, Ross told reporters, according to AFP.

In a proclamation, Trump said, “measures are in place to address the impairment to the national security threatened by imports of steel and aluminum from Argentina, Brazil, and Australia,” extending the tariff exemption for those countries. Trump’s proclamation added that, “At this time, similar measures are not in place with respect to steel or aluminum imports from Mexico, Canada or the European Union. Therefore, as of June 1, 2018, tariffs will no longer be suspended for steel or aluminum imports from those countries. The administration will continue discussions with them and remains open to discussions with other countries.”

Ross told reporters that despite weeks of talks with his EU counterparts, the U.S. was unwilling to meet the demand that the EU be “exempted permanently and unconditionally from these tariffs,” AFP reported.

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German Chancellor Angela Merkel told a press conference with Portuguese premier Antonio Costa in Lisbon that the EU would respond in a “firm and united” manner to the tariffs.

Rick Helfenbein, president and CEO of the American Apparel & Footwear Association, criticized the use of punitive tariffs by the Trump administration on U.S. imports of steel and aluminum from Canada, Mexico and the European Union.

“To make this move against our closest allies, especially during the renegotiation of NAFTA, creates more difficulty and chaos for the business community. Let’s be clear, Made in USA apparel and footwear will suffer as a direct result of this action by the Trump administration,” Helfenbein said. “Not only will this move result in inflationary costs, but we risk retaliation by our trading partners. In particular, the EU has already indicated that it will impose tariffs on American-made blue jeans, T-shirts and footwear. The ability to export our Made in USA product is essential for the health of the domestic manufacturing industry. This will be detrimental for our companies and for American workers.”

Canada, the EU and Mexico are the three largest markets for exports of Made in USA apparel, AAFA noted. Canada and the EU are the top two markets for Made in USA footwear.

“Just as the administration was downgrading the storm from a ‘trade war’ to a ‘trade dispute,’ it has decided to take a very negative turn,” Helfenbein said. “It is important to note that tariffs are a hidden tax on the American consumer. They will inflate prices throughout the economy and hurt American job growth. New barriers will not create new opportunities for Americans.”

This week’s announcement on the Chinese tariffs came after the two nations had released a joint statement earlier in the month that recent meetings held in Beijing were “constructive.” At the time, the White House said China would “significantly increase purchases of United States goods and services” to reduce the trade deficit in goods, though no details were released.

Ross and his Chinese counterpart are scheduled to hold talks next week on the trade dispute. The White House said a list of affected products will be announced by June 15.

The White House said the U.S. also plans to restrict specific investments and impose export controls on China. Details on both measures are to be announced by June 30, the White House said.

A World Bank Report on Thursday warned that “rising trade tensions are one of the main risks to China’s outlook.” The report, which said China’s gross domestic product grew 6.9% in 2017 and 6.8 percent year on year in the first quarter of 2018, added that, “The economic impact of recently announced U.S. trade measures would be manageable, but the costs of investment restrictions—in terms of limited access to foreign technology and skills—could be significant.”

“The bigger risk for the world economy, as well as for China, would be a major weakening of the rules governing global trade and investment and an unraveling of global value chains,” the World Bank added.

A spokesperson for China’s Foreign Ministry, at a briefing Wednesday in Beijing, said, “Every flip-flop and U-turn is simply depleting and squandering [U.S.] credibility. China is committed to properly resolving relevant trade issues through equal dialogue.”

“China always maintains that we should properly resolve and address relevant differences over economic and trade issues through equal-footed dialogue and consultations in a constructive manner,” the spokesperson said. “This serves the fundamental and long-term interests of our two countries and peoples, and meets the shared aspirations of the international community. Once again, we don’t want a trade war, but will never quail or recoil from a trade war. One move can always be countered by another. If the U.S. is bent on having its own way, we will surely take firm and forceful measures to safeguard our legitimate rights and interests.”