US President Donald Trump has decided to implement steel and aluminium tariffs on neighbouring countries Canada and Mexico, as well as the European Union.
According to a statement from the White House issued Thursday, the Trump administration will lift the suspension of 25 per cent and 10 per cent tariffs on steel and aluminium imports, respectively, from Canada, Mexico and the EU.
The tariffs are intended to “protect America’s national security from the effects of global oversupply of steel and aluminium,” the statement said.
Where the US had reached various agreements with South Korea, Australia, Argentina and Brazil on steel and aluminium, it was “unable to reach satisfactory arrangements, however, with Canada, Mexico, or the European Union, after repeatedly delaying tariffs to allow more time for discussions”.
The White House statement claimed current quantities of steel and aluminium imports into the country “threaten to impair national security”.
“The excessive level of imports threatened to impair the national security because further closures of domestic production capacity would result in a situation where the United States would be unable to meet demand for national defence and critical infrastructure in a national emergency,” the statement said.
AMP chief economist Shane Oliver said the newly announced tariffs amounted to “protectionism” and called it “dumb economics, particularly at a time when the US is already operating at close to full capacity”.
“It’s worth putting all these tariffs in context: steel and aluminium imports are less than 2 per cent of US imports (and its less than that as many countries including Australia are exempted) and $50 billion of Chinese imports are also less than 2 per cent of US imports,” he said.
“So taken together it’s a non-event compared to the 1929 or 1971 tariff hikes that covered most imports. A proportional response is expected on steel and aluminium but it’s only going to have a significant global economic impact if it triggers multiple rounds of tit-for-tat tariff hikes across a broad range of products.
While the risks had been elevated, it was still a long way off “from a broad-based trade war globally,” Mr Oliver concluded, noting that President Trump would want to avoid pushing too hard.
NAB senior economist Gerard Burg also indicated the tariffs would not have major material consequences for Australia.
“The direct impact of these tariff measures are likely to be limited for Australia – only around 4 per cent of Australia’s goods exports in 2017 were shipped to the United States, and iron & steel and aluminium were a small share of this trade,” he pointed out.
But Mr Burg added: “From the broader international perspective, US steel and aluminium tariffs should translate into higher prices for consumers of these commodities.”