The French president slams US ‘economic nationalism’ as EU leaders weigh up retaliation, as US tariffs on steel and aluminium imports come into effect.
ADVERTISEMENTHuge tariffs on imported steel and aluminium from Europe, Canada and Mexico have come into effect in the United States.
The measures announced on Thursday ended months of uncertainty about possible exemptions, illustrating a hardening of the Trump administration's stance towards trade negotiations.
There has been strong condemnation abroad and in the US. Canada and Mexico have retaliated while the European Union says its own reprisals are ready to go.
The row has revived fears of a global trade war.
Macron: US move ‘illegal’
US tariffs of 25 percent on steel imports and 10 percent on aluminium from the affected countries came into effect at midnight in Washington - 06.00 Central European Time (CET).
EU leaders have responded angrily. Emmanuel Macron spoke to Donald Trump on the phone on Thursday evening and called the American decision “illegal”, the Elysee Palace said.
“Economic nationalism leads to war. That is exactly what happened in the 1930s," the French President said, vowing that the EU would respond “in a firm and proportionate manner”.
The German government has promised that the response to “America First” will be “Europe united”. Chancellor Angela Merkel said she was afraid of an “escalation that will damage everyone”.
Germany’s economy minister has said the EU might look to coordinate its response with Canada and Mexico. “We tried to do it through negotiation and we will do it by standing together and formulating a common European answer, possibly working more closely with Mexico and Canada,” Peter Altmaier said.
The EU has threatened tariffs on US products such as jeans, Harley Davidson motorbikes and bourbon – measures aimed at the political bases of US Republican legislators. Shares in both companies fell.
Brussels will also now trigger a dispute settlement case at the World Trade Organisation, saying the United States is acting against agreed international rules.
"This is not the way we do business, and certainly not between longstanding partners, friends and allies," EU Trade Commissioner Cecilia Malmstrom said in a statement.
Businesses on both sides of the Atlantic – especially in Europe's steel and aluminium sector – are bracing themselves for a battle.
"We need to take safeguard measures for the EU. We're at the front door of a trade war. Therefore, we have to continue discussions, negotiations with the US. That has to be done on a political level because the European Commission is also planning other rebalancing measures, it's not only about safeguards," said Axel Eggert, Director-General, European Steel Association (EUROFER).
The steel industry is big business in the EU. It directly employs around 320,000 people, producing 170 million tonnes of steel every year, at more than 500 production sites.
The US is the second biggest export destination after Turkey – 4.9 million tonnes of steel went there last year.
Trump: 'Fair Trade!'
Donald Trump is in no doubt that slapping tariffs on European steel imports is the right thing for the US to do. Late on Thursday the US president issued a statement about North American Free Trade Agreement (NAFTA), over which Washington has been embroiled with Canada and Mexico.
“The United States will agree to a fair deal, or there will be no deal at all,” he said.
ADVERTISEMENTA Trump administration investigation earlier this year concluded that the volume of steel and aluminium imports threatened US national security by undermining domestic production.
However, US industry bodies and also Republican members of Congress have criticised the move as counterproductive.
Many trade experts argue the US is hitting the wrong targets, as the worldwide glut of steel and aluminium is largely blamed on excess production in China.
“There is a much broader issue, a much bigger issue that the administration in Washington is aware and that's the distortions in the Chinese economy that need to be addressed,” said Peter Chase of the German Marshall Fund of the United States.
“The US will need to have the EU as an ally. And to be getting into a quarrel with the EU at the same time that we have a much bigger issue is tactically wrong - and strategically wrong."
ADVERTISEMENTUS Trade Secretary Wilbur Ross heads to Beijing on Friday where he will attempt to secure more US exports to cut America’s trade deficit with China.
Fears over what’s next
The US tariffs have sparked warnings that they could destroy Europe's steel industry, where prices could drop by up to 40 percent.
European carmakers fear their industry could be next. Last week the US administration also launched a national security investigation into car and truck imports.
Meanwhile, Canada – the largest supplier of steel to the US – has announced tariffs on US imports of metals and other products such as whisky and orange juice. Mexico says it is imposing “equivalent” measures on US farm and industrial products.
