Zerohedge
Zerohedge

Trump Imposes Steel, Aluminum Tariffs On EU, Canada And Mexico

05/31/2018

As widely leaked over the past few days and as confirmed earlier this morning, moments ago Commerce Secretary confirmed that the Trump administration is imposing steel and aluminum tariffs on the EU, Canada and Mexico, with the tariff set to begin at midnight tonight to help protect America’s manufacturing base:

  • TRUMP TO IMPOSE STEEL, ALUMINUM TARIFFS ON CANADA, MEXICO, EU
  • U.S. COMMERCE SECRETARY ROSS SAYS EUROPEAN UNION, CANADA AND MEXICO WILL FACE STEEL AND ALUMINUM TARIFFS BEGINNING AT MIDNIGHT TONIGHT
  • ROSS SAYS EU, CANADA, MEXICO WILL PAY 25 PCT STEEL TARIFF AND 10 PCT ALUMINUM TARIFF: RTRS

Canada, Mexico and Europe were exempted from import duties of 25% on steel and 10 per cent on aluminum when they were first imposed in March, but those exemptions will expire at midnight.

Ross told a conference call with media this morning that he is looking forward to continuing negotiations. But in the case of Canada and Mexico, he said the decision was based on making progress in the ongoing North American Free Trade Agreement talks, and there is no resolution in sight. “The talks are taking longer than we had hoped.”

Ross also said he’s looking forward to “continued negotiations” with Canada, Mexico and EU “because there are other issues” that need to be resolved. There’s potential “flexibility” in the future because the president has the power to increase or cut tariffs, remove them, or enact quotas, he said.

President Donald Trump has justified the metals duties by invoking a national security provision under Section 232 of a 1960s trade law.

US Steelmakers were delighted with the news, as Alcoa, the largest U.S. aluminum producer, rose over 2% to $49.60 while Nucor, the biggest US steelmaker, also rose more than 2% percent to $65.50 a share.

Meanwhile, as noted earlier, both the CAD and MXN continued selling off on the news, with the  Loonie erasing yesterday’s BOC hawkish language-driven gains…

… while the Peso slumped to one-week lows…

Canada Unleashes Retaliatory Tariffs On US: Here Is The Full List Of Affected Products
05/31/2018

And so, the trade wars have begun…

In slightly more than a strongly-worded email  Canadian PM Justin Turdeau exclaimed his indignance at the Trump administration’s decision to impose tariffs on Canadian steel and aluminum imports, saying it is an “affront”:

“Let me be clear, these tariffs are totally unacceptable,” 

Trudeau said “Canada is a secure supplier” of metals to the U.S. military, and the idea of a security threat “is inconceivable.” He called the tariffs “punitive” noting that US has a $2billion steel trade surplus with Canada.

With that he announced retaliatory tariffs against the US.

Canadian Foreign Affairs Minister Chrystia Freeland announced “dollar-for-dollar tariffs for every dollar levied against Canadians by the U.S.,” starting July 1 that will remain in place as long as U.S. tariffs do.

The tariffs cover Whiskey, Orange Juice, and other food products as well as steel and aluminum.

Measures will apply to up to C$16.6 billion dollars of products.

Canada’s full list of actions includes 25% tariff on the following…

And 10% tariff on the following items…

As Goldman explains, the decision to impose tariffs on Canada and Mexico (and now seeing Canada’s response) suggests that prospects for a NAFTA agreement in the near-term are fading. 

The Administration’s negotiating stance is often unpredictable so there is a risk of over-interpreting any single event. That said, this represents another signal that prospects for a near-term NAFTA deal are fading, just a few weeks after it had appeared fairly likely that a “skinny” agreement involving the auto sector might be reached.

However, Goldman note that the incremental inflation effect of these tit-for-tat tariffs should be small. We estimate that adding Canada, Mexico, and the EU to the countries facing a tariff of 25% on steel and 10% on aluminum could boost core PCE by roughly 1bp. Imports from NAFTA and EU countries make up just under half of steel and aluminum imports.

Finally, in his Q&A Trudeau made it clear that “Canada’s relationship with US is deep and complex” but warned that “US will harm its own people with such measures.”

Mexico said earlier that it would impose its own retaliatory tariffs on a wide range of products from US steel to pork, sausages and fruit.