AGAINST ALL ADVICE, TRUMP GOES AHEAD WITH TARIFFS AGAINST OUR ALLIES

…This is a true caricature of Donald J. Trump

The president has chosen to sharply escalate his global trade war

President Trump’s team has now announced sweeping tariffs on steel and aluminum imports from Canada, Mexico and the European Union.

Frustrated over the failure of those US trading partners to agree to a range of Trump’s demands, the president chose to sharply escalate his global trade war rather than grant further tariff waivers.

The import taxes took effect immediately today, Friday, June 1^st, 2018.

The move is likely to have an immediate impact on global trade in steel and aluminum, particularly between the United States and Canada, who is America’s largest source of imported steel.

The decision is totally asking for retaliation from each of the US trading partners, which have vowed to erect new barriers to a range of US products.

The president has been threatening to toughen the US trade stance against Canada and Mexico since last year.  He had backed down after leaders of both Mexico and Canada and other US lawmakers had intervened, but that is over for now.

Senior administration officials were in active discussions with negotiators from Canada, Mexico, and the European Union, and numerous scenarios were presented, but as usual with the president , he on his own decided to fulfill another of his campaign promises, no matter who it harms.

Commerce Secretary Wilber Ross has stated that the tariffs will only affect the economy by 1%.  But 1% of the US economy is still worth billions of dollars.  Trump is also considering a tariff on foreign built autos.

But all of these tariffs are expected to cause many job losses in US manufacturing across the board, especially in industries in Ohio, Pennsylvania, Michigan, Wisconsin, Illinois and Indiana.

It is also expected that the largest purchaser of US soy beans, China, is now looking at changing their purchases to those soy bean growers in South America.

Trump’s moves threaten to upend negotiations over any new North American trade deals.

Over the Memorial Day weekend, Canadian officials including Prime Minister Justin Trudeau and Foreign Minister Chrystia Freeland engaged in a desperate bid to head off the tariffs by offering concessions aimed at reaching at least a limited deal.

Even after the tariffs are imposed, the trade talks will continue, according to Eric Miller, president of the Rideau Strategy Group consultancy.  Mexico isn’t making a major issue of metals production, and Canada is hoping that their talks will eventually succeed.  “I fully expect they’ll get the tariffs and Canada will retaliate, but they won’t say that they’ll pull out,” he said. “They will try to minimize the damage.”

Imposing the metals tariffs on the E.U. will eventually intensify a clash over multiple import levies. 

Washington will still try to prevent multi­-national businesses from trading with Iran.  But the 28-nation European Union does symbolize everything Trump hates about globalization.  Although his complaints about China may be better known, he has long chafed at the E.U.’s trade practices.

The United States last year incurred a trade deficit of more than $150 billion with the E.U., its No. 1 trading partner, the deficit which Trump has labeled as, “unacceptable.”

Although most economists say that trade flows are determined by broader economic forces such as national savings rates, Trump, not offering any details for his statements, he blames European tariffs for the imbalance between the E.U. and the US.

The president has been especially zealous about the auto­mobile industry. The E.U. adds a 10% import tax to American passenger cars while European cars arriving in the United States with a 2.5% duty.  What Trump wants to do will cause all foreign built cars to cost more for American buyers.

The E.U.’s shared sovereignty is also against Trump’s nationalist preference for bilateral trade deals, as he made it clear last month during the visit by French President Emmanuel Macron.

“Trade with France is complicated because we have the European Union,” Trump said, sitting alongside the French leader. “I would rather deal just with France. The union is tough for us . . . So we have to make a change.”

Commerce Secretary Wilbur Ross introduced a fresh irritant into already strained transatlantic ties when he complained that the E.U.’s new General Data Protection Regulation (GDPR), which took effect last week, will prompt major changes in American companies’ responsibilities to protect consumers’ privacy.

“GDPR’s implementation could significantly interrupt transatlantic cooperation and create unnecessary barriers to trade, not only for the US but for everyone outside the E.U.,” Ross wrote that in an op-ed for the Financial Times. “We do not have a clear understanding of what is required to comply.”

Trump recently threatened to impose tariffs on imported automobiles, which would hit Germany, Europe’s largest economy, especially hard. And European companies will be affected by the re-imposition of US sanctions on Iran.

As those sanctions, which are designed to isolate Iran’s banks and weaken its economy, are implemented this summer, European companies will face a choice between trading with Iranian customers or having access to the US financial system. “European companies will scream, and that will be a bigger crisis than the steel tariffs,” said William ­Reinsch, a senior adviser at the Center for Strategic and International Studies. “It’s a struggle of will, and it’s a struggle of law.”  (And we all know that Trump has no respect for the Rule-of-Law.)

The commercial stakes are gi-normous.

American businesses last year exported $283 billion of goods to the E.U., more than twice the total they shipped to China, while customers in the United States purchased nearly $435 billion in products from European companies.

High tensions with Europe have found the administration engaged in fights with other major US trading partners.

Trump recently threatened China with tariffs on $50 billion in products and investment restrictions ahead of Ross’s scheduled arrival in Beijing for the resumption of trade talks. US officials also continue to plug away at efforts to negotiate a new North American trade deal, although those negotiations appear likely to stretch into 2019.

Secretary Ross has had several discussions with E.U. Trade Commissioner, Cecilia Malmstrom, over the steel and aluminum tariffs. She told the European Parliament that “realistically” it did not appear that Europe could escape new US trade restrictions.

The E.U.’s commercial relationship with the United States “is becoming increasingly complex,” she added, blaming the United States for “unilateral initiatives that are undermining the multilateral trading system.”  (Trump hates any multilateral trade agreements.  He only wants “one-on-one” bilateral agreements.)

US business groups want the administration to lift all tariff threats. Myron Brilliant, executive vice president of the US Chamber of Commerce, said to do otherwise risks “alienating” allies which will then boomerangs against the US economy.

“Such a move would hit American manufacturers with higher costs, slow the growth of the US construction sector, and put the brakes on job creation in both of these key industries,” Brilliant said in a statement. “US steel prices are already nearly 50% higher than those in Europe or China.”

Talks are snagged on the E.U.’s refusal to negotiate over the administration’s demand for limits on metals shipments to the United States without first receiving a permanent exemption. European officials have said they are willing to talk about stepped-up energy trade, regulatory cooperation, market openings for industrial products including cars and World Trade Organization (WTO) reform, but only if the United States stops threatening tariffs.  (And we know with Trump, that ain’t going to happen.)

Secretary Ross, meanwhile, has complained that “it’s only the E.U. that is insisting we can’t negotiate if there are tariffs,” noting that Chinese companies are paying the steel and aluminum levies while trade talks continue.

Trump’s habit of negotiating by making tough opening demands, to then quickly give ground, as he did by granting exemptions covering two-thirds of US steel imports.  This approach may be reason for the stiffening of the European spines.

“It pays to stand up to this administration,” said Edward Alden, senior fellow at the Council on Foreign Relations. “I don’t see Europe being willing to make big concessions to get trade peace.”

The spat over Europe’s new privacy rules has far-reaching implications. The GDPR regulations apply to all companies, not only data-hungry tech giants. 

Hours after GDPR took effect, privacy watchdogs filed complaints against Facebook and Google in Ireland and Apple, Amazon and LinkedIn in France. In the United States, Commerce Department officials urged European regulators to hold off on enforcement until they clarify its implementation.

In recent days, E.U. officials said they had heard the Americans’ concerns. “They recognize this will have impact for some companies,” David O’Sullivan, E.U. ambassador to the United States, said in an interview. “Obviously, with any piece of legislation that newly enters into force, we’re aware there may be some issues with people getting used to how things work.”

Europe’s approach differs greatly from the United States, which does not have a federal consumer privacy law. Privacy advocates, who hope to leverage the E.U.’s new rules into a global standard, have pushed companies to apply stronger privacy protections to their users, even those who do not live on the continent, while urging regulators to mimic the E.U.’s regulations.

Given the basket of trade issues that divide the United States and the E.U., the weeks ahead may witness a deepening divide.

“Trump is making a major blunder if he thinks the E.U. will buckle or not fight back when it comes to trade restraints,” economist George Magnus, an associate at Oxford University, said in an email. “There are two things the E.U. is good at . . . It is nothing if not a sophisticated regulatory union, and it’s very skilled and adept at framing trade strategies and fighting in its corner.”

I personally think Trump’s actions against our trading partners is going to cost America over the long run in ways that we have no concept of today.

Copyright G.Ater  2018