WASHINGTON/PARIS/BEIJING (Reuters) – President Donald Trump is to press ahead with the imposition of 25 percent tariffs on steel imports and 10 percent on aluminum, although he said on Thursday he was willing to strike a deal that could exempt Canada and Mexico.
Washington has repeatedly offered relief from steel and aluminum tariffs to countries that “treat us fairly on trade” a gesture aimed at putting pressure on Canada and Mexico to give ground in separate North American Free Trade Agreement (NAFTA) talks, which appear to be stalled.
“I’m sticking with 10 and 25 (percent) initially. I’ll have a right to go up or down, depending on the country, and I’ll have a right to drop out countries or add countries,” he told reporters at the beginning of a Cabinet meeting at the White House.
Trump said he would announce the duties later on Thursday. The range of potential exemptions for allies and for industries has made the final outcome unpredictable.
The president said he was pleased with progress in the NAFTA talks, although he again said he would still be willing to terminate the agreement, a threat he has made since he started running for office.
Few observers share Trump’s rosy view of the NAFTA talks, which they say have made little progress since they started six months ago and are stalled over issues such as autos, an industry whose contribution to the U.S., Mexican and Canadian economies far outweighs that of steel and aluminum production.
In addition to exemptions, there could be a consultation period that would lead to intense lobbying by industry and a growing group of disgruntled Republican lawmakers who oppose the tariffs proposed by the president, a fellow Republican.
Talk of tariffs has raised the prospect of a global trade war and hit stock markets hard. Both the European Union and China have said they would retaliate against action by the United States, as have Mexico and Canada.
“If Donald Trump puts in place the measures this evening, we have a whole arsenal at our disposal with which to respond,” European Financial Affairs Commissioner Pierre Moscovici said.
Countermeasures would include European tariffs on U.S. oranges, tobacco and bourbon, he said. Harley Davidson Inc motorcycles have also been mentioned, targeting House of Representatives Speaker Paul Ryan’s home state of Wisconsin.
Speaking before Trump made his remarks, Canadian Prime Minister Justin Trudeau said there was a “level of confidence” that the country’s close relationship with the United States will protect it from U.S. tariffs.
Trudeau’s negotiators in the NAFTA talks have rejected the American proposals to link the tariffs and the trade talks, and an attempt by Washington to split Canada and Mexico has also been rejected.
Even as Trump threatened tariffs and his NAFTA partners, 11 nations gathered in Chile to sign a landmark Asia-Pacific trade pact, one that Trump withdrew from on his first day in office in January last year.
Trump, who won office after a career in real estate and reality TV, has long touted an economic nationalism, promising to bring back jobs to the United States and save the country from trade deals he views as unfair. That has put him at odds with many in his Republican Party.
(For a graphic of U.S. steel imports by country click reut.rs/2Fkjb5g)
(For a graphic of U.S. visible trade balance click reut.rs/2Fmon8N)
CHINA STEELS ITSELF FOR A RESPONSE
Beijing, which until now had kept largely silent on the issue, sharpened its rhetoric significantly. One lever that China has is U.S. agricultural exports and it has said in the past that it could target soybeans.
“Especially given today’s globalization, choosing a trade war is a mistaken prescription. The outcome will only be harmful,” Foreign Minister Wang Yi said on the sidelines of an annual meeting of China’s parliament. “China would have to make a justified and necessary response.”
China had a record $375.2 billion goods surplus with the United States last year.
Trade tensions between the world’s two largest economies have risen since Trump took office, and although China accounts for only a small fraction of U.S. steel imports, its massive industrial expansion has helped create a global glut of steel that has driven down prices.
Trump’s administration has faced growing opposition to the tariffs from prominent congressional Republicans and business leaders worried about their potential impact on the economy.
The White House has said there could be a 30-day tariff exemption for Mexico and Canada – and some other countries – based on national security..
A White House official linked any extension of the exemption to progress in the talks to renegotiate NAFTA. The talks were launched last year after Trump said Washington would withdraw from the 1994 deal if it were not reworked to better favor American interests.
Most economists and trade specialists say they doubt the steel and aluminum tariffs alone would trigger a global trade war, but point to the risk of further U.S. measures against China as a major tipping point. Trump has also threatened to impose hefty tariffs on European car exports if the EU does take retaliatory measures.
(For a graphic of Global trade and GDP growth click reut.rs/2FtPzhW)
Additional reporting by Michael Martina, Elias Glenn, Kim Coghill, Brian Love, Nichola Saminather, Doina Chiacu and Andrea Hopkins; writing by David Stamp and David Chance; editing by Frances Kerry and Jonathan Oatis