The European Commissioner for Trade Cecilia Malmstrom vowed on May 31 to open a World Trade Organization (WTO) case against US President Donald J. Trump‘s decision to invoke an obscure law that labelled the EU and Canada – the US’ closest allies and fellow NATO members – as national security threats which opened the door for the White House to slap stiff steel and aluminium tariffs on its Euro-Atlantic partners.
Brussels is said to be targeting Harley Davidson, bourbon, peanut butter, denim jeans and a number of products that are not only “iconic” but will hurt prominent Republicans in their constituencies. According to Bloomberg, the EU is planning to impose retaliatory tariffs to the tune of €2.8 billion by June 20.
US tariffs on European steel and aluminium came into force on June 1, and placing the EU on the same level as Mexico, China, Canada, South Korea, Japan, and China. The 25% tariff on steel and 10% on aluminium are meant to shield the US economy from a glut in production, which is mostly attributed to China.
French Finance Minister Bruno Le Maire and German Finance Minister Olaf Scholz have slammed Trump’s unilateralism, with Le Maire reminding the White House that Europe is the US’ biggest trading partner.
French President Emmanuel Macron equated Trump’s move to geopolitical developments in the 1930s that led to the Second World War, saying “economic nationalism leads to war”. Macron doubled down on his rhetoric by making it clear that the EU will not negotiate with Trump “while a gun is pointed at our head.”
Joining Europe’s outrage over the announced tariffs was Canada’s Prime Minister Justin Trudeau, who called Trump’s decision to label Canada as a national security threat a slap to the face while also vowing to join the EU and Mexico in taking retaliatory measures and taking the case to the WTO.
Trump has also reportedly targeted German car manufacturers and is also bracing for $50 billion in tariffs on Chinese imports.
US Trade Secretary Wilbur Ross said there are a number of EU tariffs on US products and that negotiations can take place despite Washington’s measures having already come into force. Brussels, however, has said it will not negotiate until Trump suspends the new tariff regime.
Trump has drummed up support with his right-wing populist base of isolationists, American nationalists, and Tea Party members – the majority of whom give little thought to foreign policy and are openly hostile to international trade, even amongst close allies like the EU and Canada.
Echoing his base’s sentiments, Trump made the encounter with Europe personal by bashing German Chancellor Angela Merkel in one of his many Tweets on the matter by mentioning the failure of Germany to meet the agreed 2% military expenditure for NATO and pointed to Berlin’s trade surplus, which he deemed illegitimate and unfair.
US stocks started losing ground on May 31 after it became clear that Canada, Mexico, and the EU will not avoid Trump’s new tariff regime. US value chains are integrated with Canada and Mexico, while Europe and China remain the largest international trading markets from the Americans.
Among the biggest losers under the new regime could be US aircraft manufacturer Boeing and machine designer Caterpillar.
The International Monetary Fund is warning that a wave of protectionist forces could undermine global economic outlook.