Global markets fell Thursday afternoon as the threat of a global trade war reignited, after the White House confirmed the European Union, Canada and Mexico would face steel and aluminium tariffs from midnight tonight, according to business a.m. monitored reported.
Officials failed to reach a deal to avert the levy before the exemption expires, US Commerce Secretary Wilbur Ross told reporters on Thursday. The exemption was set to expire on Friday.
“We look forward to continued negotiations, both with Canada and Mexico on the one hand, and with the European Commission on the other hand, because there are other issues that we also need to get resolved,” Ross said.
He added they had “made some progress,” but not enough to warrant a new exemption.
That means from tonight all steel products entering the US will face a 25 percent tariff, while aluminium will be hit with a 10 percent duty.
The news pushed markets – already jittery as a result of the political chaos in Italy and Spain – into negative territory.
Italy’s FTSE MIB is currently down 0.13 percent, while Spain’s Ibex is 0.2 percent lower and Germany’s Dax is down 0.75 percent.
The FTSE 100 has fallen since the news broke but is still just in positive territory, up 0.085 percent for the day.
On Wall Street, the Dow Jones Industrial Average is down 145 points or 0.62 percent.
European Commission President Jean-Claude Juncker said: “This is protectionism, pure and simple. Over the past months, we have continuously engaged with the US at all possible levels to jointly address the problem of overcapacity in the steel sector. Overcapacity remains at the heart of the problem and the EU is not the source of but on the contrary equally hurt by it.”
In a sternly-worded statement, he added that the EU would “not negotiate under threat”.
“By targeting those who are not responsible for overcapacities, the US is playing into the hands of those who are responsible for the problem. The US now leaves us with no choice but to proceed with a WTO dispute settlement case and with the imposition of additional duties on a number of imports from the US. We will defend the Union’s interests, in full compliance with international trade law.”
EU trade commissioner Cecilia Malmström added: “Today is a bad day for world trade. We did everything to avoid this outcome… Throughout these talks, the US has sought to use the threat of trade restrictions as leverage to obtain concessions from the EU.
“This is not the way we do business, and certainly not between longstanding partners, friends and allies.
“Now that we have clarity, the EU’s response will be proportionate and in accordance with WTO rules.”
The EU had already threatened reprisal tariffs, which could tip the US into another trade war. It is already on the brink of one with China over country-specific tariffs aimed at redressing the trade imbalance.
Back in March, Malmstrom said her tit-for-tat list included iconic US products such as Levi jeans, bourbon, peanut butter, cranberries and orange juice.
Gareth Stace, director of the trade association UK Steel, said: “This is a bad day for the steel sector, for international relations and for free trade.”
“Any US calls for the EU to voluntarily place hard limits on its exports of steel were completely unjustified, against WTO rules and run counter to central tenets of free-trade. It is only right that have been rebuffed by European Commissioner, Cecilia Malmström.
“It is difficult to see what good can come of these tariffs, US steel consumers are already reporting price increases and supply chain disruption and with some half billion dollars of steel exported from the UK to US last year, UK steel producers are going to be hit hard. As stated time and time again, the only sustainable solution to the root cause of the issue, global overcapacity in steel production, is multilateral discussions and action through established international channels.”
Ben Digby, the international director of the Confederation of British Industry, added: “The President’s measures are deeply concerning for firms in the UK, for close trading partners and across supply chains.
“Now is not the time for any disproportionate escalation, and we urge the EU to consider this when initiating its response… We hope that the USA will swiftly reconsider its decision, and we will be pressing home the importance of our transatlantic relationship with our counterparts and government figures in Washington, London and Brussels in order to protect the free and fair trade that is the key to our economic future.”