US President Donald Trump struck a defiant tone on Friday, saying trade wars were good and easy to win, after his plan to put tariffs on imports of steel and aluminum triggered global criticism and a slide in stock markets.
Good and easy to win, he says. Photo: AFP
The European Union raised the possibility of taking countermeasures, France said the duties would be unacceptable and China urged Trump to show restraint. Canada, the biggest supplier of steel and aluminum to the United States, said it would retaliate if hit by US tariffs.
US stocks opened sharply lower on Friday, fueled by fears of a global trade war. The Dow Jones Industrial Average fell more than 1 percent and the broader S&P 500 index was down 0.5 percent as investors dumped shares of US manufacturing companies that would have higher production costs if imported steel became more expensive.
The US dollar fell against most currencies, dropping to its lowest level in more than two years against the yen.
Trump said on Thursday that a plan for tariffs of 25 percent on steel imports and 10 percent on aluminum products were designed to safeguard American jobs in the face of cheaper foreign products and would be formally announced next week.
"When a country (USA) is losing many billions of dollars on trade with virtually every country it does business with, trade wars are good, and easy to win," Trump tweeted on Friday.
In a later Facebook post, Trump said his aim was to protect US jobs.
"We must protect our country and our workers. Our steel industry is in bad shape. IF YOU DON'T HAVE STEEL, YOU DON'T HAVE A COUNTRY!" he wrote.
Many economists say that instead of increasing employment, price increases for consumers of steel and aluminum such as the auto and oil industries will destroy more US jobs than they create.
Retaliation likely
The prospect of retaliation from Canada, China and Europe sent world stocks tumbling towards a 2.5 percent weekly loss.
ArcelorMittal SA, the world's biggest steelmaker, slumped nearly 5 percent and shares in automakers such as Fiat Chrysler suffered on concerns US tariffs could increase the cost of key materials used in cars.
"It is a real worry because Europe is an open global economy so it isn't just about US versus China," said Ian Ormiston, European equity fund manager at Old Mutual Global Investors. "And we will see retaliation, there are no two ways about it."
Home appliance maker Electrolux said it was delaying a US$250 million (NZ$346m) expansion of its plant in Tennessee as it was worried US steel prices would rise and make manufacturing there less competitive.
Peter Navarro, a White House adviser with largely protectionist views on trade, brushed off the drop in US stock prices and the negative effects of tariffs on US industry.
"I think the smart money right now is buying this market," he told Fox News.
He said a 10 percent tariff on aluminum would add one cent to the cost of a can of beer, US$45 to a car and US$20,000 to a Boeing 727 Dreamliner. "Big price effects? Negligible price effects," he said.
The European Commission, the EU's executive, called the US tariffs a blatant intervention that amounted to protectionism and promised to act "firmly" in response.
The EU, which sees itself as a global counterweight to a protectionist-leaning Trump, made no mention of retaliation but spoke of countermeasures that conform with World Trade Organization (WTO) rules.
"We don't see this as a situation where, like in a zero-sum game, one party loses because another party wins. Trade is beneficial for everyone. It needs to take place on the basis of rules and these rules are in place," a European Commission spokesman said.
Safeguard measures, last deployed by Europe in 2002 after then-US President George W. Bush imposed steel import duties, would be designed to guard against steel and aluminum being diverted to Europe from elsewhere if US tariffs come in.
But to conform with WTO rules such measures would have to apply to imports from all countries and could also hit producers including China, India, Russia, South Korea and Turkey.
Officials have not said whether the tariffs would include imports from Canada and Mexico, Washington's partners in the North American Free Trade Agreement (NAFTA), which is being reworked.
US Commerce Secretary Wilbur Ross said on Friday that Trump's tariffs announcement "seemed" to apply to all countries.
"That's what the president seemed to announce yesterday," Ross told CNBC.
Canadian Foreign Minister Chrystia Freeland called any trade restrictions "absolutely unacceptable" and said Canada would "take responsive measures to defend its trade interests and workers" if needed.
Mining company Rio Tinto, the largest producer of aluminum in Canada, Alcoa Corp and the United Steelworkers union, which represents workers in the United States and Canada, all said Canada should be spared tariffs.
Protectionism
Steel has become an important focus for Trump, who said he would restore the US industry and punish what he sees as unfair trade practices, particularly by China.
Republican US Senator Ben Sasse, who has been critical of Trump, said there were only losers in trade wars.
"Kooky 18th century protectionism will jack up prices on American families - and will prompt retaliation," he said in a tweet. "Make no mistake, if the president goes through with this it will kill American jobs."
The United States is the world's biggest steel importer, buying 35.6 million tonnes in 2017. Canada is the leading supplier, accounting for 16.7 percent, followed by Brazil at 13.2 percent and South Korea at 9.7 percent.
Although China accounts for only 2 percent of US steel imports, its massive industry expansion has helped produce a global steel glut that has driven down prices.
"China urges the United States to show restraint in using protective trade measures, respect multilateral trade rules, and make a positive contribution to international trade order," Chinese Foreign Ministry spokeswoman Hua Chunying said.
- Reuters