Trump fires back at EU tariff retaliation threatsHeat Profit
Donald Trump has fired back at EU threats to retaliate against his planned tariffs on imports of aluminium and steel, declaring he would simply target European automakers if that happened.
“If the EU wants to further increase their already massive tariffs and barriers on US companies doing business there, we will simply apply a Tax on their Cars which freely pour into the US,” the US president tweeted on Saturday. “They make it impossible for our cars (and more) to sell there. Big trade imbalance!”
The riposte back across the Atlantic came as EU officials said they were preparing to present a list of US goods to member states on Monday as part of their retaliation against Mr Trump’s proposed tariffs.
It also came a day after the president hailed the prospect of a global trade war despite a backlash from US allies and global Investors over his plans.
In a series of Friday morning tweets, Mr Trump declared “trade wars are good” and “easy to win” as he vowed to fulfil his campaign promises to defend US workers and industry from what he has long portrayed as unfair foreign competition.
“We must protect our country and our workers. Our steel industry is in bad shape. IF YOU DON’T HAVE STEEL, YOU DON’T HAVE A COUNTRY!” he tweeted.
Even as close aides tried to rein in Mr Trump’s tariff pledge and to exempt allies such as Canada, the president promised to escalate his battle, repeating a vow to impose “reciprocal taxes” on other countries, or raise low US tariffs to match those of other countries.
China offered a measured response to the US move, but the EU moved quickly to threaten its own action. Cecilia Malmström, EU trade commissioner, told the Financial Times the bloc would have little choice but to challenge any Trump tariffs at the World Trade Organization and to impose its own tariffs and other retaliatory measures.
“We risk seeing a dangerous domino effect from this,” she said.
Jean-Claude Juncker, the European Commission president, suggested the EU could target typically American products such as Harley-Davidson motorcycles, bourbon whiskey and blue jeans.
EU officials on Monday are due to present a €2.8bn list of more than 100 US goods targeted for retaliation that goes beyond that. It will include US steel products and agricultural products like rice, maize, orange juice and cranberries. It would go into effect within 90 days of any formal US action.
“I don’t like using the words ‘trade war’, but I can’t see how [the US move] isn’t part of warlike behaviour,” Mr Juncker told German media on a visit to Hamburg.
Roberto Azevêdo, the WTO’s director-general, warned that the world was at risk of descending into a trade war.
“The potential for escalation is real,” he said. “A trade war is in no one’s interests.”
Fears that the US tariffs could escalate matters helped send the FTSE All-World stock Market index to a 2.4 per cent loss this week, with industrial groups, aircraft manufacturers and carmakers falling due to the risk of higher material costsand dangers of retaliatory action.
“When governments get involved in free Markets, it is almost never a good thing,” said Michael Arone, chief Investment strategist at State Street Global Advisors. “Until we get some clarity on what the impact is of all of this, we are likely to see more volatility.”
While global stocks remained weak on Friday, the US S&P 500 index clawed its way back from an initial tumble to end the day up 0.5 per cent, thanks to a rally in more defensive sectors like healthcare, telecoms and consumer staples, as well as technology stocks.
Nonetheless, analysts and Investors remain on edge over how the US tariffs could reverberate. “This really could be a big deal,” said Brad McMillan, chief Investment officer for the Commonwealth Financial Network. “The net effect of the tariffs . . . will be economic damage, higher inflation and greater geopolitical uncertainty.
“On the corporate side, it will be lower profits for the vast majority of companies. On the consumer side, it will be higher prices for many goods and, likely, lost jobs in export industries. That is why this issue is worth watching closely,” he added.
US business groups warned that tariffs were likely to hurt more companies than they helped. There were also signs that they could discourage foreign Investment in the US, which would be a blow to Mr Trump’s efforts to attract foreign capital.
Electrolux, Europe’s largest appliances maker, said it was putting on hold a $250m Investment in a cooking factory in Tennessee it had announced in January. “We’re concerned about the impact that the tariffs could have on the competitiveness of our US operations,” the Swedish company said.
Ivan Scalfarotto, a senior Italian trade official, told the FT the EU needed to safeguard its own Market from the US action and take countermeasures against US products.
“This is totally unjustified . . . and it is harming the global economy,” he said, pointing to the €4.8bn of steel Italy exported to the US in 2017, as well as €1bn of aluminium. “Our producers are not happy and they are right not to be happy. But this is not just about protecting our national interest, it is about protecting our rules.”
Additional reporting by James Politi in Rome, Richard Milne, Nordic correspondent, and Michael Peel in Brussels