Trump Tariffs Spark Ally Anger, Stock Market Plunges
The Trump administration's plan to place tariffs on steel and aluminum sparked an outcry among major producing nations and stock market plunges Friday, fuelling fears of an imminent tit-for-tat trade war.
After weeks of rumor and counter-rumor about his administration's intentions, President Donald Trump on Thursday announced he would sign off on measures designed to protect US producers "next week".
The tariffs -- 25 percent on steel and 10 percent on aluminum -- cover two materials that are the lifeblood of the construction and manufacturing sectors.
The announcement was greeted with fury within key US trading allies such as Canada, the EU, Australia and Mexico.
It also caused jitters across global stock markets.
The benchmark Dow Jones Industrial Average lost as much as 2.3 percent on Thursday and Asian markets quickly followed suit. Tokyo, Hong Kong, Sydney and Seoul were all sharply down Friday afternoon with many major industrial giants hit particularly hard.
European Commission chief Jean-Claude Juncker led criticism of Washington, saying the EU "will react firmly" to defend its interests.
"We will not sit idly while our industry is hit with unfair measures that put thousands of European jobs at risk," he added.
- 'Unacceptable' -Canadian Trade Minister Francois-Philippe Champagne responded even more bluntly.
"Any tariffs or quotas that would be imposed on our Canadian steel and aluminum industry would be unacceptable," Champagne told parliament. "Any such decision would have an impact on both sides of the border."
Australia's Trade Minister Steve Ciobo said his biggest concern was now "retaliatory measures" by other major economies.
"That's in no-one's interests," he told reporters.
Trump has long threatened to impose tariffs on steel and aluminum, accusing other countries of dumping and deploying "unfair" trade practices.
He has been particularly critical of China, although it does not export particularly large quantities of steel and aluminum to the US.
The timing of Trump's announcement was provocative for Beijing -- its top economic envoy Liu He was in Washington and holding meetings at the White House on Thursday.
China has previously warned it was ready with countermeasures should the Trump administration deploy tariffs but there was no official response from Beijing by early Friday afternoon.
The White House has embarked on a campaign to renew American infrastructure, with steel likely a major input.
But Trump's announcement has faced significant domestic opposition, including within his own White House and party.
US automakers, oil and gas producers and other industry groups publicly urged the president not to impose new trade barriers on the metal imports, warning the measures could jack up prices and invite reprisals, harming the economy.
- 'Danger is contagion' -Sources familiar with Trump's decision say he faced stern opposition from aides, including top economic advisor Gary Cohn, who argued the move could ultimately damage US industry.
Up to the last moment, there were doubts about whether Trump would pull the trigger.
But trade hawks like Peter Navarro -- a presidential aide who, after weeks on the sidelines, was by the president's side as he made his remarks -- appeared to have won the day.
The same sources said it is not impossible that the shock announcement is followed by carve outs that make the measures more palatable to allies in Europe, Canada and South Korea.
Trump's decision, which leans on a rarely used trade provision allowing protections for national security, could also hit other countries far more than China, which has been the main target of the administration's trade anger.
China is the world's largest steel producer but accounts for less than one percent of US imports and sells only 10 percent of its wrought aluminum abroad. Steel producers in Canada, Brazil, Mexico, South Korea and Turkey rely far more heavily on the US market.
The Commerce Department said last month it determined that the global glut of steel and aluminum threatened US national security, and presented the White House with a set of options, including quotas, tariffs targeting specific countries, or across-the-board tariffs on all imports of aluminum and steel.
Trump's proposal most closely resembled the last option.
Analysts said that while there were initial sharp stock market losses in the steel and aluminum sectors following the announcement, the main fear was what it could mean in the future.
"We think overall, the danger is contagion -- the reaction -- rather than the actual tariffs themselves," Fat Prophets resources analyst David Lennox told AFP.
"We don't know the details yet and it'll be the reaction of the countries where the tariff will be applied. Where or how will those countries retaliate? Because it will happen and that's what people worry about."