The response of other trade blocs to America’s move will hurt, writes John Whelan.
US president, Donald Trump, stunned the world by slapping steep trade tariffs on foreign steel and aluminium, drawing protests across the globe, amid fears of an international trade war.
Continuing the sharp departure from a decades-long drive by the US for more open, less-regulated trade, he said that America had been “ravaged by aggressive foreign-trade practices”.
He announced tariffs of 25% on imported steel and 10% on aluminium, which are used in everything from cars to construction, roads to railways. For Ireland’s international traders, there is not so much concern about these initial tariffs, but more about the counter measures of trading allies, whose friendly agreements with the US have been tossed aside.
Germany, which has a large steel industry at risk, was criticised by Mr Trump, who revived a longstanding gripe that European NATO allies do not pay their fair share. The German foreign minister robustly replied: “The EU must respond decisively to US punitive tariffs, which endanger thousands of jobs in Europe.”
Japan said the moves may gravely impact its economic relationship with the US. The real target of the tariffs is China, which derided them as “a serious attack on the normal international trade order”.
UK trade secretary, Liam Fox, said the European Commission will be directing the UK’s response to Mr Trump’s steel tariffs, clarifying comments made last week, which suggested the government was seeking a separate exemption.
This latest trade dispute must be cause for concern in the UK, where prime minister, Theresa May, has been making strong pronouncements on its ability to negotiate an early free trade agreement with the US, once Brexit kicks in, next year.
They now know that when tariffs are needed to protect American jobs and national security, free trade agreements count for nothing.
Europe has warned the US will introduce retaliatory tariffs against American products, such as orange juices from Florida and California, Harley-Davidson motorbikes, Levi clothing, and Kentucky bourbon.
The last attempt by the US to illegally protect its steel industry was in 2002, when George Bush was president. The EU responded by introducing a long list of US products with a tariff value that would recover the €2bn they maintained was the cost of meeting the US tariffs.
We can expect an equally long list of products to be on the EU retaliator list this time. And, as happened in 2002, the US responded with a rotating carousel of products other than steel to which it applied import tariffs.
This is the justifiable concern of Irish exporters, who may get caught in the cross hairs of a shoot-out between the US, the EU, and other trading blocks.
In Ireland, the 450 employees at Aughinish Alumina plant, near Foynes, in Limerick, will be concerned that the dispute will put their jobs at risk. That the owners of Aughinish are the Russian group, Rusal, is unlikely to be seen in a favourable light in Washington, amid claims of Russian interference in presidential elections.
But with the unpredictable Mr Trump as head of state, who knows? Rusal is the largest producer of aluminium globally and its Irish facility is the largest alumina refinery in Europe, with sizeable exports to the US.
Meanwhile, US aluminium producers have applauded the Trump support tariff, and Century Aluminum have committed to restarting one of their facilities, which will add 150,000 tonnes of capacity annually at its smelter in Kentucky.
Propping up inefficient plants with trade-protectionist measures has not worked in the past , but when did that get in the way of a good political stunt?
- John Whelan is a leading expert in Irish and international trade.
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