And, Exhale

EU gets last-minute reprieve on US steel, aluminum tariffs

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We're going to keep on talking. Source: Reuters

Germany and other European Union countries got at least a temporary reprieve from US tariffs that were due to go into effect on Friday. The import taxes of 25 percent on steel and 10 percent on aluminum will be suspended for the time being for the EU and half a dozen other countries as US President Donald Trump juggles various aspects of trade policy in unpredictable ways.

US Trade Representative Robert Lighthizer disclosed the exceptions in testimony Thursday before a Senate panel, after indicating on Wednesday that some US allies would get exemptions from the tariffs. The suspension is temporary as talks continue regarding a permanent solution, the US official said. He added that the negotiations should be completed by the end of April.

Mr. Trump suggested at one point that an exemption from the tariffs might be linked to the dispute in NATO on sharing costs for military spending. Germany and several other EU countries are well below the 2-percent of GDP target pledged by NATO members and the newly formed Berlin coalition failed to set a concrete timetable for reaching it.

Trump has been erratic in his positions as he appears to be jockeying for maximum leverage on a number of fronts.

But Mr. Lighthizer seemed more focused on consolidating a united trade front against China. The threat of the steel and aluminum tariffs could be a way to pressure EU countries to go along with that effort. Mr. Trump formally announced on Thursday his plan to impose some $60 billion in annual penalty tariffs on China, accusing them of unfair trade practices.

Last-minute lobbying by European Trade Commissioner Cecilia Malmström may have played a decisive role in the reprieve on the steel and aluminum tariffs. The Swedish commissioner returned from Washington last night after meetings with Mr. Lighthizer and US Commerce Secretary Wilbur Ross. She told the European Parliament Thursday morning that she expected Mr. Ross to recommend an exemption for the entire EU, but that the final decision rested with the president. German Economics Minister Peter Altmaier accompanied Ms. Malmström in the Washington talks.

The reprieve for the EU was not unexpected. Bart Oosterveld at the Washington think tank Atlantic Council said that while the initial tariff announcement was “a big surprise,” it seemed as the situation progressed only “a matter of time” before the EU would win an exemption. But the Trump administration shouldn’t expect its turnabout to soften the EU’s own position when it comes to China. The tariff dispute had raised hackles on trade matters and will take a while to cool off, Mr. Oosterveld said.

Once the situation does calm, however, the EU might actually decide to back the United States for its own reasons. “This is a genuine topic of mutual concern,” Mr. Oosterveld said regarding China, particularly when it comes to intellectual property. “It’s in their interest to work with the US on this. I think that’s going to be the endgame,” he added. “But it’s not happening today. Temperatures are a little high today.”

Mr. Trump has been erratic in his positions as he appears to be jockeying for maximum leverage on a number of fronts. Also, his advisors seem to be divided on how hard a line to take. Top trade advisor Peter Navarro, for instance, has been opposed to any exemptions from the steel and aluminum tariffs.

Mr. Oosterveld said it would be too soon for Europe to rest on its laurels when it comes to an unpredictable US administration. “Can Europe relax? Probably not,” he said. That goes, among other things, for the ongoing threat of an import tax on EU carmakers. It’s hard to say whether Mr. Trump’s threats against German manufacturers like Daimler and BMW amount to a “strategy or just a talking point,” Mr. Oosterveld said. “But it is a space I would watch carefully if I were in Germany.”

Canada and Mexico were exempted from the tariffs when they were announced earlier this month. Mr. Lighthizer on Thursday said that four other countries – Argentina, Brazil, Australia and South Korea – would also be exempted for now.

Several Handelsblatt reporters including Annett Meiritz in Washington and Christopher Cermak in Berlin contributed to this report. Darrell Delamaide adapted this article into English. To contact the author: d.delamaide@extern.handelsblatt.com.

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