IntelBrief: Trade War Heats Up Again
Bottom Line Up Front:
- Press reports indicate that U.S. President Trump will enact tariffs on steel and aluminum imported from the EU and others on June 1.
- EU Trade Commissioner Cecilia Malmstro said the EU would not escape new trade sanctions.
- The new EU privacy law is also creating tension with Washington, with U.S. firms saying they cannot comply with the General Data Protection Regulation (GDPR).
- From China to the EU to Canada and Mexico, the U.S. is trying to demand bilateral deals against an international multilateral framework.
The Trump Administration is ramping up its threats against three of its largest trading blocs: the EU, Mexico and Canada through NAFTA, and China. It is expected that on June 1, the U.S. will impose significant new tariffs on imported steel and aluminum. The EU, as well as countries like Japan, had hoped for an exemption, or at least a hold on the tariffs during negotiations, but the U.S. has pushed ahead. Of the many points of friction between the U.S and the EU, trade policies are among the most contentious.
The new tariffs will be a 25% tariff on imported steel and a 10% tariff on imported aluminum. This will hurt Canada—the U.S.’ largest source for imported steel—as well as other U.S. allies. Japanese Prime Minister Shinzo Abe said on May 30 that the tariffs, including a possible 25% tariff targeting car imports, were unacceptable; he added that ‘from a security perspective, it’s very difficult to understand why this would be imposed on Japan, a military ally.’ The timing is particularly bad for Abe, who is trying to work with the U.S. on the North Korean issue but consistently undercut by the U.S.’ chaotic approach to diplomacy. The tariffs will put significant domestic political pressure on Abe, as well as negative pressure on the already weak Japanese economy.
For its part, the EU might be hoping for another last minute change in plans by the U.S., as it has done several times. The EU refuses to hold talks with the tariffs in place, saying it would not ‘negotiate under threat’ from its increasingly antagonistic ally across the Atlantic. U.S. Commerce Secretary Wilbur Ross has pointed out that the Chinese have continued to engage in negotiations while under the new tariffs and wondered why the EU cannot do the same. Sigrid Kaag, the Dutch foreign trade and development minister, stated that the EU is ‘finding ourselves in a situation we shouldn’t be at…and the fact China continues negotiations I don’t think applies to us in this case.’ If the tariffs take effect, as early as June 1, the EU will almost certainly retaliate, though how remains unclear.
The U.S. is also continuing its high-profile Twitter-talks with China. On May 13, President Trump tweeted: ‘President Xi of China, and I, are working together to give massive Chinese phone company, ZTE, a way to get back into business, fast. Too many jobs in China lost. Commerce Department has been instructed to get it done’. ZTE has been banned from U.S. government purchases out of concern about its ties to the Chinese military and intelligence services. President Trump’s proclamation is at direct odds with the rest of the U.S. government and has led to a rare bi-partisan movement to block such a move. Talks with China are ongoing, with Secretary Ross expected to make another trip to Beijing soon.
Another issue over which the U.S. and Europe are at odds is privacy. The new EU-wide privacy laws that affect how companies—including social media giants like Facebook and tech giants like Apple—have traditionally operated have generated great concern in the U.S., which has no federal privacy law and has seen a string of cases in which user/consumer data was inappropriately used or collected. The General Data Protection Regulation (GDPR) restricts what user information companies can collect and how they can use that information—restrictions that U.S. companies worry will impact their business models. Regarding privacy, trade, and a host of other issues, the U.S. continues to be out of step with the EU.
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