The Cable

EU Promises Trade War If Trump Imposes Steel Restrictions

If President Donald Trump wants a war over steel, the Europeans are primed to give it to him.

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The results of the Trump administration’s investigation into whether steel imports represent a national security threat are expected any day now, and could open the door to restrictions on U.S. imports — and spark conflict with the world’s biggest economic bloc.

Ostensibly, the object of the administration’s review of steel and aluminum trading practices is China, notorious for dumping cheap steel on global markets. But trade experts have repeatedly explained that any new restrictions on steel imports into the United States would actually hurt countries like South Korea, Germany, and Canada — not Beijing, which is already hamstrung by a spate of trade restrictions.

“We will respond with countermeasures if need be, hoping that this is not actually necessary,” European Commission President Jean-Claude Juncker said Friday ahead of meetings in Hamburg of the Group of 20 world economies. “We are prepared to take up arms if need be.”

According to media reports, nearly all of Trump’s advisers have warned against against any additional steel import tariffs or quotas. That disharmony within the administration has delayed the conclusion of the security review.

In addition to aiming at the wrong target, and angering big trade partners, such tariffs would raise costs for millions of U.S. consumers and thousands of U.S. manufacturers. But a small cadre of economic nationalists close to Trump are urging him to take advantage of the Cold War-era trade rules to protect a relatively small U.S. industry.

Commerce Secretary Wilbur Ross is almost done with his multi-month inquiry into whether steel imports put national security at risk. He has argued that large steel imports from foreign sources makes the United States vulnerable because it undermines the domestic steel industry. (The Pentagon has never expressed much concern about foreign steel undercutting U.S. defense needs, but foreign aluminum is a different matter.)

The potential spat over steel added yet another contentious issue to the G20 meeting which was already tense because of Trump’s decision to leave the Paris climate agreement, making the United States one of only three countries outside that pact. But creeping trade protectionism, and what seems to be a deliberate abdication by the Trump administration of a commitment to global free trade, is concentrating minds in Hamburg — especially for European leaders who can recall the disastrous consequences of protectionism and autarky.  

“It’s up to us to avoid such things as protectionism, this very simple thing. That would be wrong,” Juncker said.

Photo credit: LUDOVIC MARIN/Getty Images

David Francis was a senior reporter for Foreign Policy, where he covered international finance. @davidcfrancis

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