May 31, 2018

Trump's trade war hits closest U.S. allies

Dave Lawler, author of World

Trump and Angela Merkel after a White House press conference in April. Photo: Mark Wilson/Getty Images

The Trump administration has decided to impose steel and aluminum tariffs on European countries, as well as Canada and Mexico.

Why it matters: Trump's trade war now extends far beyond China, and is hitting the closest U.S. allies. EU Commission president Jean-Claude Juncker said the EU has "no choice" but to retaliate — with previously floated targets including Harley Davidson motorcycles and Kentucky bourbon — while Mexico has already announced it will hit "pork bellies, grapes, apples and flat steel," per the AP. The news also comes amid NAFTA negotiations with Canada and Mexico.

The details, per the NY Times: "A 25 percent tariff on steel and a 10 percent tariff on aluminum from the European Union, Canada and Mexico, which supply nearly half of America’s imported metal, will go into effect at midnight Thursday, Wilbur Ross, the commerce secretary, said on a call with reporters."

Axios' Jonathan Swan on why it matters:

  1. Domestic and imported steel and aluminum prices could spike.
  2. Retaliatory measures could come into effect almost immediately, and increase the likelihood of a broader trade war.
  3. This is going to have knock-on effects. Until now, the only country that has directly retaliated against the U.S. on these steel and aluminum tariffs is China. Other countries have made threats but haven’t retaliated yet. Should the EU decide to do so, that would effectively give cover for other WTO members to do the same.

Europe is already furious with Trump over his Iran deal decision. This will only deepen the divide, Célia Belin of Brookings notes: "It's one thing to take a decision that disregards European interests. It's another thing to take a decision that attacks European interests."

Go deeper: Europe's pent-up fury with Trump.

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