President Donald Trump said he plans to impose “reciprocal taxes” on imports to reduce the US trade deficit — a move sure to ratchet up tensions with Washington’s trading partners.
But taking the more drastic step of imposing reciprocal import tariffs on all goods and countries would eviscerate the rules-based global trading system.
Fears of an escalating trade war roiled Asian markets, hitting the share prices of steelmakers and manufacturers supplying US markets particularly hard. US stock futures pointed to a steady start on Friday after a sharp fall following Trump’s Thursday announcement.
Trump said the duties of 25 percent on steel and 10 percent on aluminum would be formally announced next week, although White House officials later said some details still needed to be ironed out.
“The imposition of a tariff like this will do nothing other than distort trade and ultimately, we believe, will lead to a loss of jobs,” Australian trade minister Steven Ciobo told reporters in Sydney.
“My concern remains that on the back of actions like this we could see retaliatory measures that are put in place by other major economies. That is in no-one’s interest.”
Australia, which has championed the free-trade Trans Pacific Partnership that Trump pulled the United States out of, has sought an exemption for its steel and aluminium exports to the United States, Ciobo added.
Steel has become a key focus for Trump, who pledged to restore the US industry and punish what he sees as unfair trade practices, particularly by China.
Although China only accounts for 2 percent of US steel imports, its massive industry expansion has helped produce a global glut of steel that has driven down prices.
“The impact on China is not big,” said Li Xinchuang, vice secretary-general of the China Iron and Steel Association. “Nothing can be done about Trump. We are already numb to him.”
China’s Foreign Ministry, asked about the proposed tariffs, said global trade would be harmed if other countries followed the example of the United States.
South Korea, the third-largest steel exporter to the United States after Canada and Brazil, said it will keep talking to US officials until Washington’s plans for tariffs are finalized.
Canada, Brazil and the EU said they would look to take action over the tariffs.
Asian steelmakers, however, do worry US tariffs could result in their domestic markets becoming flooded with steel products that have nowhere else to go.
“We are concerned about how other exporters react, what will happen with steel that cannot be sold to the US,” Vikrom Wacharakrup, chairman of the Federation of Thai Industries’ iron and steel industry group, told Reuters. Thailand exports steel mainly to Asia but also the United States.
The Trump administration also cited national security interests for its action, saying the United States needs domestic supplies for its tanks and warships.
Contrary to the action announced by Trump on Thursday, the Department of Defense had recommended targeted steel tariffs and a delay in aluminum duties.
Trump believes the tariffs will safeguard American jobs but many economists say the impact of price increases for consumers of steel and aluminum, such as the auto and oil industries, will be to destroy more jobs than they create.
Japan’s Toyota Motor Corp said the tariffs would substantially raise costs and therefore prices of cars and trucks sold in the United States.
“The world stands on the brink of a trade war as Donald Trump announces severe tariffs on steel and aluminium – forget the yield curve – this is how recessions start,” said Robert Carnell, head of research, Asia-Pacific at ING in Singapore.
“Trade is just about the only thing economists are agreed on – more is better,” he said.