Home News US Delays Decision on Tariffs for EU, Prolonging Uncertainty

US Delays Decision on Tariffs for EU, Prolonging Uncertainty

Image credits: TOPSHOT - US President Donald Trump leaves after a meeting with EU officials at EU headquarters, on the sidelines of the NATO (North Atlantic Treaty Organization) summit, in Brussels, on May 25, 2017. / AFP PHOTO / THIERRY CHARLIER (Photo credit should read THIERRY CHARLIER/AFP/Getty Images)

The U.S. government will take another 30 days to decide whether to impose tariffs on imports of steel and aluminum from the European Union, Canada, and Mexico, extending a period of uncertainty for businesses in those regions.

The delay helps the U.S. avoid a potential trade war with allies as it prepares for tense trade talks in China this week. But the EU slammed the decision as bad for business that "prolongs market uncertainty, which is already affecting business decisions."

"As a longstanding partner and friend of the U.S., we will not negotiate under threat," the EU said in a statement Tuesday.

The Trump administration said Monday it had reached an agreement with South Korea on steel imports following discussions on a revised trade agreement. And the administration said it had also reached agreements in principle with Argentina, Australia and Brazil on steel and aluminum that will be finalized shortly.

"In all of these negotiations, the administration is focused on quotas that will restrain imports, prevent transshipment and protect the national security," the White House said.

Facing a self-imposed deadline, President Donald Trump was considering whether to permanently exempt the EU and Mexico, Canada, Australia, Argentina and Brazil from tariffs of 25 percent on imported steel and 10 percent on imported aluminum that his administration imposed in March. The White House had given itself until the end of Monday to decide whether to extend the exemptions.

The EU has taken a tough stance, raising the prospect of a trade war if the U.S. does not back down. It has a list of retaliatory tariffs worth about $3.5 billion on imports from the U.S. that it will activate if the EU loses its exemption.

Germany said it continues to expect a permanent exemption. The EU's largest steel exporter to the U.S., it accounted for about 5 percent of U.S. steel imports last year.

"Neither the EU nor the U.S. can have an interest in an escalation of their trade tensions," a spokeswoman for Chancellor Angela Merkel said Tuesday in a statement.

European financial officials have cited the trade tensions created by the U.S. tariffs proposal as a risk to the economy. Some surveys suggest a downtick in business and consumer confidence, though it's unclear how big an impact the trade tensions are having.

While experts say the immediate potential damage from the aluminum and steel tariffs is limited, the danger is of a tit-for-tat escalation in which both sides slap more duties on each others' goods.

"The imposition of tariffs might signal that the two regions are heading towards a more serious trade conflict," says Stephen Brown, European economist at Capital Economics.

Trump says he wants to protect American metal producers from unfair competition and bolster national security. But the tariffs' announcement in March, which followed an intense internal White House debate, triggered harsh criticism from Democrats and some Republicans and roiled financial markets.

At the time, Trump excluded several vital trading partners — the EU, Mexico, Canada, Australia, Argentina and Brazil — from the tariffs.

That meant the steel tariff covered just 30 percent of all imports, according to Oxford Economics. If all the exemptions were ended, it would have deepened the impact of the tariffs on American companies that use steel and potentially affect financial markets. Stock prices fell nearly 2 percent when the tariffs were announced.

Two people familiar with the process said the Trump administration had been considering whether to provide a short-term extension of the exemptions to allow for more time to review the countries' efforts to secure permanent exemptions. The officials spoke only on condition of anonymity to describe internal deliberations.

The EU and others had been asked to spell out what limits they could accept on the amount of steel they export to the United States, how they would address the issue of excess production of steel and aluminum, and how they would support the U.S. before international bodies like the World Trade Organization. Security relationships with the U.S. have also been part of the criteria.

South Korea made up the largest share of U.S. steel imports last year, shipping about 13 percent of U.S. imports, according to an American Iron and Steel Institute analysis of government data. It has agreed to limit its exports to the United States and was granted a permanent exemption.

China, Japan and Russia haven't received exemptions, which will likely reduce steel shipments from those countries over time. Commerce Secretary Wilbur Ross said Friday that quotas on imports from Europe and other countries are necessary so imports from those countries don't simply replace Chinese imports. The goal of the tariffs is to reduce total steel imports and boost U.S. production, Ross said.

"If you let everybody back out of the tariff, and you let them out of any kind of quota, how would you ever reduce the imports here?" Ross asked at a conference of journalists.

European leaders have resisted the idea of a quota. Merkel said Sunday that she discussed the issue with French President Emmanuel Macron and British Prime Minister Theresa May after returning from a White House visit Friday.

In her meeting with Trump, Merkel said, she saw little progress in obtaining permanent exemptions. "The decision lies with the president," she said Friday.

A United Kingdom spokesperson called Monday's postponement "positive" and said the country will continue to work with the EU partners and the U.S. to achieve a permanent exemption.

In a separate trade battle with China, the United States has threatened to impose tariffs on $150 billion of Chinese goods in retaliation for what it argues are Beijing's unfair trade practices and its requirement that U.S. companies turn over technology in exchange for access to its market. The White House also wants China to agree to reduce its $375 billion goods trade surplus with the U.S.

China has said it would subject $50 billion of U.S. goods to tariffs if the U.S. taxes its products. Trump has said that a delegation led by Treasury Secretary Steven Mnuchin, U.S. Trade Representative Robert Lighthizer and trade adviser Peter Navarro will visit Beijing for negotiations Thursday and Friday.

"We're going to have very frank discussions," Mnuchin in an interview broadcast Monday on Fox Business.

Most analysts think the talks will lead to longer-term negotiations.

Source: US News & World Report

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