The threat of a trade war between the European Union and the United States has intensified as the Trump administration announced it would impose tariffs on steel and aluminium imports from the EU at midnight tonight.
The European Union had secured a temporary exemption from US tariffs of 25 per cent on steel imports and a 10 per cent levy on aluminium when the Trump administration first announced the measures in March.
But ahead of a June 1st deadline, commerce secretary Wilbur Ross said on Thursday that talks with the EU had not made sufficient progress to merit an exemption.
The levies will also be placed on Canadian and Mexican imports of steel and aluminium, complicating ongoing talks on Nafta, the north-American free trade agreement between the US, Mexico and Canada.
Speaking from Paris where he is attending the OECD meeting, Mr Ross said that the president had “decided in the case of Canada, Mexico and the European Union not to extend the exemptions and therefore they will be placed under the 25 per cent tariff on steel and the 10 per cent tariff on aluminum effective at midnight tonight.”
Any new tariffs on aluminium imports into the US will hit the Aughinish Alumina plant in Limerick. Aughinish provides alumina to some of the biggest users of aluminium in Europe who then export their products to the US. Much of its output is used for aluminium in the car and aeronautical industries.
In a statement, the Minister for Business, Heather Humphreys, said the Government was “deeply disappointed” by the tariff move. She said she had raised the issue will Mr Ross when she recently visited Washington, while the European Commission had also continuously engaged with the US government on the matter.
“ I regret that these efforts - by the EU trade commissioner, Ireland and other member states - have not resulted in the EU being provided with a permanent exemption from US tariffs,” Ms Humphreys said.
In relation to Aughinish, the Minister said overcapacity in the market combined with tariffs made for “a difficult trading environment”.
“My department, through the enterprise agencies, in particular IDA Ireland, is in close contact with perspective exporting companies who may be affected directly or indirectly as part of supply chains,” she added.
EU retaliation
The European Union’s top trade official, Cecilia Malmstrom, indicated last week that she was not confident of a deal with the US despite intensive negotiations.
The Europeans had offered to open up four areas of trade for discussion- including granting the US greater market access to industrial products.
But the offer was insufficient for the US negotiators.
The European Union has warned that it would respond to any tariffs with retaliatory measures. In an initial reaction to the news, a British government spokesman said that Britain and other EU countries are close allies of the United States and should be permanently fully exempted from the tariffs.
Manfred Weber, a top German MEP in the European Parliament and close ally of German chancellor Angela Merkel responded on twitter: “We will have no choice but to defend European industry, jobs and interests. We will not accept this highly regrettable decision without reacting.”
America first
The EU branch of the American Chamber of Commerce urged the US government to reconsider its actions and called on the EU to take a “balanced approach” to the measures. “We are very concerned by the damage a tit-for-tat dispute would cause to the transatlantic economy and its impact on jobs, investment and security across the Atlantic,” its chief executive Susan Danger said.
The Brussels-based organisation said it continued to believe that the EU meets all the criteria set out for a permanent exemption as it does not pose a security threat to the US - the primary reason given by the US for imposing the sanctions in the first place. The Trump administration has invoked a section of the 1962 Trade Expansion Act which grants the US the ability to impose trade sanctions for national security reasons.
Washington's decision to press ahead with the sanctions is the latest sign that president Trump is following-through with his election promise to put 'America first' and pursue a protectionist approach to international trade. China is also in the president's sights. Mr Ross is due to travel to Beijing this weekend to continue difficult trade talks with China, as the US continues to try and reduce its trade deficit with China.
US stock markets fell on the news, though steel and aluminium stocks strengthened. The dollar strengthened against the euro.
Failed negotiations
Washington has been renegotiating Nafta with Canada and Mexico but those talks have become stuck over how to rewrite auto content rules. The US has also been trying to force the EU into negotiating and making concessions such as reducing a 10 per cent tariff on automobile imports in exchange for an exemption from the steel tariffs.
It also wants the EU to agree to a quota that would limit European steel and aluminium exports to the US as part of what Washington insists is a strategy to get Beijing to stop flooding global markets with cheap metals.
But Paris and Berlin are against giving into US demands, with French president Emmanuel Macron, a proponent of tougher EU trade policies, adamant there could be no trade discussions “with a gun to our head”.
In March, Brussels approved a list of US products as targets for retaliation that included bourbon, Harley-Davidson motorcycles, jeans, cigarettes and sailboats. A European Commission spokesman said on Thursday: “We are ready to deal with any kind of scenario and to defend the EU interest and international trade law.”
William Lavelle, head of the Irish Whiskey Association warned that “while the EU is justified and right to respond...the Irish whiskey industry would hope we can avoid slipping into what could be a devastating trade war in whiskey.”
Aughinish Alumina
Aughinish Alumina is already caught up in US sanctions introduced last month targeting Russian individuals and businesses including Russian billionaire Oleg Deripaska, the majority shareholder in EN+ Group which in turn owns 48 per cent of Aughinish’s owner Rusal.
The US has extended the wind-down period or individuals doing business with Rusal and also indicated that it would provide sanctions relief to the company if Mr Deripaska relinquishes control.
