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US trading partners seek guidance on how to avoid Trump's metal tariffs

Emre Peker & William Mauldin/Brussels/Washington 12 Mar 18 | 08:22 PM

Illustration by Binay Sinha

American and European officials are planning new trade talks this week as US allies seek ways to avoid steel and aluminum tariffs and China signaled it is poised to retaliate if President Donald Trump implements his biggest “America first" economic action to date.

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Trump’s tariffs declaration Thursday has rattled two of the US’s biggest economic partners, Japan and the European Union. The two economies together account for about a quarter of America’s annual trade in goods, and leaders from both stressed serious concern over the weekend, calling on US officials to exclude them from the measures as close security and trade allies.

US Trade Representative Robert Lighthizer met with EU Trade Commissioner Cecilia Malmstrom and their Japanese counterpart, Hiroshige Seko, in Brussels on Saturday. Officials didn’t immediately comment on the timing and format of the further talks slated for this week.

UK Trade Secretary Liam Fox is also expected to speak with US officials during a trip to Washington this week.

Trump, for his part, appears to be unwavering in his plans, saying at a campaign-style rally in Pennsylvania late Saturday, after the Brussels meeting, that the metals tariffs are his “baby." Separately, in a tweet Saturday, Trump said: “The European Union, wonderful countries who treat the US very badly on trade, are complaining about the tariffs on steel & aluminum. If they drop their horrific barriers & tariffs on US products going in, we will likewise drop ours." Mr. Trump also reiterated his objective to close America’s trade deficit with the EU: “If not, we Tax Cars etc. FAIR!"

Malmstrom said after a meeting with Lighthizer that there was “no immediate clarity on the exact US procedure for exemption however, so discussions will continue next week."

Similarly, Lighthizer didn’t give a clear answer on whether Japan would get an exemption, Seko said, according to Kyodo, the Japanese news agency.

“I firmly and clearly expressed my view that this is regrettable," Seko said about the tariff move at a news conference after the meeting with Lighthizer. “I explained that this could have a bad effect on the entire multilateral trading system," the Japanese envoy said.

EU officials have said they wouldn’t enter into trade negotiations in exchange for waivers from the import tariffs of 25 per cent on steel and 10 per cent on aluminium. Malmstrom, during her meeting with the president’s trade representative, reiterated that Brussels was ready to respond in kind unless Washington granted Europe an exemption—despite concerns in Germany over the president’s threat to retaliate with duties on European cars.

The EU has warned that, unless Washington grants the bloc an exemption, it would impose €2.8 billion ($3.5 billion) of levies on certain American products, challenge Mr. Trump’s move at the World Trade Organization and enact measures to safeguard European industries from steel and aluminum exports diverted from U.S. markets.

On Sunday, China’s commerce minister, Zhong Shan, said that Beijing doesn’t want a trade war and wouldn’t initiate one but reiterated that the government is ready to retaliate. “We can handle any challenge," Zhong said at a briefing Sunday in Beijing.

The Trump administration hasn’t settled on an exact plan for excluding countries from the tariffs, although officials said Mexico and Canada, already facing broad trade negotiations with Washington, wouldn’t face tariffs on metals exports for the time being.

The US still appears to be formulating its guidelines on waivers, which may be published soon, according to people familiar with the weekend’s discussions. A spokeswoman at the US trade representative’s office declined to comment.

In Washington, the planned tariffs were creating some awkward political divisions, as Republican lawmakers in TV appearances openly discussed legislation to limit the GOP president’s trade powers while prominent Democrats backed  Trump’s move. Sen. Elizabeth Warren, who has frequently clashed with Trump publicly, declined to criticise his policy during her appearance on CNN.

The Trump administration is imposing the metal tariffs under a 1960s law that allows for trade barriers on national-security grounds. “On the issue of steel and aluminum, those specific industries are critical to US national security," White House spokesman Raj Shah said Sunday on ABC.

Trump said on Twitter that he spoke with Japanese Prime Minister Shinzo Abe about “opening up Japan to much better trade with the US". The current US trade deficit with Japan is “not fair or sustainable," the president wrote, and he put the gap at $100 billion. The actual merchandise trade deficit with Japan was $68.8 billion in 2017, according to the US Census Bureau.

The Trump administration has focused on trade deficits as the main yardstick for bilateral economic relations and threatened to impose tariffs if countries don’t take steps to balance trade with Washington. China’s Zhong said the U.S. trade deficit with China isn’t as severe as Washington says it is and could be reduced by 35 per cent if the US lifted restrictions on exports of high technology to China.

The agenda for EU-US talks this week is also not yet set, but officials from both sides are expected to have phone calls and meetings—though likely not at the highest levels.

One source of hope for Brussels is the trilateral agreement on a seven-point plan the US, EU and Japan formulated to fight unfair trade practices. While the allies didn’t name any countries, they took aim at oft-criticized Beijing policies such as overcapacity, subsidies and trade-distorting practices.

The trade officials also said they would “enforce existing rules by working jointly on current and new disputes in the WTO" and engage in multilateral efforts to address issues such as the global steel glut.

EU hits out at trade 'bullies'

The EU's top trade official on Monday said Europe would stand up to intimidation by protectionists, as a row with US President Donald Trump over controversial steel and aluminium tariffs heated up.

"In some places trade has been to blame for the pains of globalisation or they used it as a scapegoat or they think we can live behind walls and borders," European Trade Commissioner Cecilia Malmstroem said at a conference in Brussels.

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