Trump Exempts Allies From Tariffs as Tensions With China Mount

President Trump signs a presidential proclamation targeting steel and aluminum imports on March 8, 2018 . (Public domain photo by official White House photographer Joyce N. Boghosian.)

On March 23, President Trump announced he had temporarily excluded six countries from the steel and aluminum tariffs that he announced earlier in the month. Canada, Mexico and the European Union, some of America’s closest trading partners, are among the nations safe from the 25 percent tariff on steel and 10 percent on foreign aluminum.

However, Trump emphasized that the exclusion was only temporary. Between now and May 1, the Trump Administration will further discuss the matter with the six excluded nations. Depending on the status of the talks, Trump will either end or continue the exclusion.

“The necessary and appropriate means to address the threat to the national security posed by imports from steel articles … is to continue these discussions and to exempt … these countries from the tariff,” Trump said in the official proclamation.

Trump’s goal in imposing the tariffs was to reduce imports of steel and aluminum from China for national security purposes. Trump elaborated on the national security justification for the tariffs, arguing that without government intervention, American aluminum and steel industry would “continue to decline, leaving the United States at risk of becoming reliant on foreign producers … a situation that is fundamentally inconsistent with the safety and security of the American people.”

Mexico and Canada are renegotiating the North American Free Trade Agreement with the United States at the moment. Renegotiating the agreement was a key part of Trump’s platform in the 2016 presidential election and he has previously stated that Canada and Mexico would only be excluded if the renegotiation was successful.

Among allies, there was a negative reaction to Trump’s decision to impose wide-ranging and steep tariffs. Chancellor of Germany Angela Merkel  stated that the EU would decisively respond to the tariffs if the United States did not exempt steel and aluminum produced in Europe.

The European Commission, one of the EU’s governing bodies, warned that it would challenge any American tariffs applied to Europe and challenge them in court at the World Trade Organization.

Before the exemption, President of the EU Council Donald Tusk urged the president in a tweet to take up talks instead of a trade war.

The EU urged Trump to pursue an alternative strategy, arguing that the U.S. ought to cooperate with the EU to reduce the massive surplus of steel and aluminum on international markets. This surplus is largely due to the Chinese government’s heavy subsidization of China’s domestic steel industry.

In light of Trump’s announcement of the exclusion, it seems possible that he heeded the advice of some of America’s closest allies.

After announcing the exclusion, Trump also announced that he had ordered trade officials to prepare a list of Chinese products to impose a tariff on. Despite China’s warnings against starting a trade war, Trump remains committed to fighting “China’s economic aggression,” as he affirmed in a White House statement.

On April 1, China made good on its threat to impose counter-tariffs on the U.S. by announcing a $3 billion fee against products such as pork and steel pipes. The superpower also said the tariffs would go into effect almost immediately.  According to US Trade Representative Robert Lighthizer, the American tariffs will be subject to a 60 day public comment period before being enacted.

After every major move, Wall Street has reacted with a sell-off as fears of a trade war escalate.

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