WASHINGTON – President Donald Trump’s planned tariffs on steel and aluminum put United States allies around the globe in a tough spot on Friday, driving down stock prices and generating warnings of a possible international trade war, according to a report from Dow Jones.
Allies in Asia and Europe lobbied for a change of heart and took issue with Trump’s invocation of a little-used Cold War-era law that gives presidents broad discretion to curb imports deemed a threat to national security.
“I believe there is absolutely no impact on America’s national security from imports of steel and aluminum from Japan, which is an allied nation,” Japanese Trade Minister Hiroshige Seko said. “I would like to look for opportunities to make this point firmly to the American side.”
The leading US military allies in East Asia – South Korea and Japan – are both large steelmakers. Germany will also be hit particularly hard.
Stocks in Europe and Asia fell sharply. The Stoxx Europe 600 dropped 1.3 percent in morning trading with every sector in negative territory, following a 2.5 percent fall in Japan’s Nikkei Stock Average. South Korea’s benchmark average was down 0.9 percent in afternoon trading, with steelmakers falling more.
South Korea’s Posco, one of the world’s largest steelmakers, fell more than 3 percent. Luxembourg-based ArcelorMittal was down 3.7 percent, while the wider basic resources sector was off 2 percent.
Trump said on Thursday he intended to impose 25 percent tariffs on steel imports and 10 percent on aluminum, following Commerce Department studies that concluded metals imports had eroded America’s ability to make its own weapons.
German Foreign Minister Sigmar Gabriel said the tariffs unfairly affect European allies.
“Unlike other countries, German and European companies in the steel and aluminum industry don’t use dumping prices to get an unfair competitive advantage,” Gabriel said in a statement Friday morning. “But this kind of sweeping world-wide blow from the U.S. would precisely hit our exports and labor market the hardest.”
Gabriel said America’s allies in the North Atlantic Treaty Organization would find it “impossible to understand” the reasoning that protecting American steelmakers is a matter of national security.
“We must do everything possible to avoid an international trade war,” he said, according to the Dow Jones report.
“We will not sit idly while our industry is hit with unfair measures that put thousands of European jobs at risk,” said Jean-Claude Juncker, president of the European Commission, vowing “countermeasures against the US to balance the situation.”
The tariffs, if made final, would also ratchet up economic tensions with Korea and Japan at a time they are working to counter the threat from North Korea developing nuclear-tipped ballistic missiles capable of hitting the continental US.
South Korea’s Trade Minister Kim Hyun-chong has been in the US since Feb. 25 to meet US members of Congress and policy makers including Commerce Secretary Wilbur Ross. The trade ministry said on Friday it would actively pursue talks “until the US government makes a final decision.”
Seko said Trump didn’t list the countries to be targeted by the tariffs, hinting at hopes that Washington might exempt its allies while targeting big steel exporter China. The president said he would give concrete details next week.
Kosei Shindo, head of the Japan Iron and Steel Federation, said earlier this week that US steel tariffs could trigger a global trade war.
“If trade restrictions are being put in place one after another, you’re opening a Pandora’s box and that’s the scariest part,” Shindo said, according to the Dow Jones report.
South Korean President Moon Jae-in told deputies last week that they should actively complain to the US if they perceive unfairness on the US side. He said they should see whether proposed curbs on steel and aluminum imports violated a US-South Korea two-way free-trade pact or World Trade Organization rules.
Under Trump, the US is already at loggerheads with South Korea in several trade disputes. The US has placed anti-dumping duties on South Korean steel and transformers, while placing tariffs in a separate case that affect South Korean washing machines and solar panels. Seoul has taken initial steps to challenge those moves at the WTO.
Under Trump’s two predecessors, the US and South Korea negotiated and completed a free-trade agreement that came into effect in 2012. Trump said it was a bad deal that widened the US trade deficit, but the two sides haven’t agreed how to revise it.