The European Union will start to impose duties on U.S. imports of aluminium on Friday, in retaliation for the Donald Trump administration’s blanket 10 percent tariffs on the metal. The measures, aimed at products worth €2.8 billion, aim to rebalance the trade with the U.S., and is based on the value of the bloc’s aluminium exports.
The decision comes after three months of fruitless EU attempts to negotiate a deal to address President Trump’s concerns that imported aluminium was putting at risk U.S. national security. The EU, however, failed to either reach a new deal or secure an extension of the exemptions that had been in place between March and May.
Commissioner for Trade Cecilia Malmström said that the “unilateral and unjustified” U.S. decision left the EU no other choice and that the EU “did not want to be in this position”. While pressing for free and open trade, she added that the EU’s response was “measured, proportionate and fully in line with WTO rules.”
We adopted the regulation putting in place the EU's rebalancing measures in response to the US tariffs on steel and aluminium. The measures will immediately target a list of products worth €2.8 billion and come into effect on Friday 22 June → https://t.co/EqmGwskgEB #EUtrade pic.twitter.com/FjvVb6NTAu
— European Commission 🇪🇺 (@EU_Commission) June 20, 2018
The European Commission issued a 10-page list of U.S products that would now be subject to duties at the EU border. U.S. steel and aluminium products, sweet corn, peanuts, bourbon whiskey, jeans and motorbikes are on the list. The products have been chosen due to their potential to harm the economy of Republican states, as the U.S. is gearing up for the upcoming Congressional elections.
The EU can also impose further “rebalancing” duties valued at €3.6 billion on U.S. exports after three years, or earlier if the WTO rules in its favour in a dispute-settlement proceeding against the U.S. tariffs. The Commission promised that the countermeasures would stay in place as long as the U.S. measures prevent the EU from exporting its aluminium to the U.S.
According to Agelos Delis of the Aston University, the European aluminium industry will suffer from direct and indirect effects. While the direct effect on European producers and workers will be negative, with their exports to the U.S. restricted, the indirect effect will be positive for manufacturing and construction. They are expected to benefit from falling prices in Europe due to increased supply – although it’s unlikely that the gains will make up for the losses incurred by metal producers.
While the Commission’s approach won unanimous support from Member States, the tit-for-tat dispute raises fears of a full-blown trade war. As the conflict is intensifying, President Trump has issued threats of further tariffs, taking aim at the European car industry.
Invoking national security under Section 232 of the 1962 Trade Expansion Act, Trump is considering a 25 percent tax on car imports. In the meantime, the U.S. Commerce Department levied preliminary antidumping duties on Chinese aluminium alloy sheet.
IMF’s director Christine Lagarde warned against a trade war saying that there would be “losers on both sides” with a “serious” impact for both the US economy and the rules-based trade system. The U.S. allies, including the EU, Norway, Mexico and Canada, filed complaints with the WTO against the U.S. tariffs describing Trump’s duties as “pure protectionism”.