Commerce Secretary Wilbur Ross announced Thursday morning that the U.S. would be ending the temporary exemptions that had been granted to the European Union, Canada and Mexico for steel and aluminum imports. With the exemptions lifted, those imports will face tariffs of 25 percent and 10 percent, respectively. The new US tariffs on steel and aluminum are set to go into effect today.Within hours, all three nations said that they will respond with punitive measures targeting American products worth billions of dollars. Jean-Claude Juncker, president of the European Commission, said the bloc would move ahead with tariffs that are expected to affect roughly $7.5 billion worth of US exports. The list includes iconic U.S. products like Kentucky bourbon, jeans and Harley-Davidson motorcycles. "The United States now leaves us with no choice but to proceed with a WTO dispute settlement case and with the imposition of additional duties on a number of imports from the United States," Juncker said in a statement. Chrystia Freeland, Canada's Minister of Foreign Affairs, outlined the country's retaliation plan on Thursday. She said that Canada will place tariffs on American goods, including steel and aluminum. Some products will be taxed 10% and others 25%. Up to about $12.8 billion will be subject to the tariffs -- the total value of last year's Canadian steel and aluminum exports to the United States. During a press conference, Freeland called the retaliation "the strongest trade action Canada has taken in the post-war era." "Let me be clear," Canadian Prime Minister Justin Trudeau said. "[The US] tariffs are totally unacceptable." He called them an "affront" to the security partnership between the United States and Canada, adding that it was "inconceivable" that trade with Canada could pose a threat to the United States. "These tariffs are an affront to the longstanding security partnership between Canada and the United States and, in particular, an affront to the thousands of Canadians who have fought and died alongside their American brothers in arms," Trudeau said. Mexico said that it would impose tariffs on a wide range of American products, including steels such as hot and cold foil, lamps, pork, sausages, apples, grapes, blueberries and various cheeses. Trump's decision to target Europe and America's neighbors comes as trade tensions with China are escalating again after he tore up a truce agreed earlier this month. The European Union has said that its retaliatory measures, which could be in place as soon as June 20, would include 25% tariffs on American products including motorcycles, denim, cigarettes, cranberry juice and peanut butter. European officials said the tariffs were designed to be "proportionate." "Today is a bad day for world trade," said EU trade commissioner Cecilia Malmström. "We did everything to avoid this outcome." Trade between the US and European Union exceeds $1 trillion annually. The United States is the world's top steel importer. The value of steel shipped into the United States was just over $29 billion in 2017. Last year, nearly 50 percent of U.S. steel and aluminum imports came from the EU, Canada and Mexico. The Mexican government said that the US action was not justified, and that it would retaliate with its own comparable penalties on US products including lamps, pork, fruit, cheese and flat steel. These moves will surely complicate ongoing negotiations between the US, Canada and Mexico on modifications to the North American Free Trade Agreement (NAFTA). Republicans in Congress, who have tried to steer the president away from tariffs, expressed dismay at his decision. Sen. Orrin Hatch (R-Utah), the chairman of the Senate Finance Committee, said the tariffs were "a tax hike on Americans and will have damaging consequences for consumers, manufacturers and workers." His counterpart in the House, Ways and Means Chairman Kevin Brady of Texas, said the tariffs “are hitting the wrong target” and instead should be aimed at China, a sentiment echoed by Speaker Paul Ryan (R-Wis.). “I disagree with this decision,” Ryan said in a statement. “Instead of addressing the real problems in the international trade of these products, today’s action targets America’s allies when we should be working with them to address the unfair trading practices of countries like China.”
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The U.S. Department of Commerce started an investigation into automobile imports to determine whether they "threaten to impair the national security" of the United States, the agency said in a statement on Wednesday night.
The surprise announcement this week comes at a time of worsening friction over trade with the United States. The new U.S. probe follows similar ones on steel and aluminum carried out under Section 232 of the Trade Expansion Act of 1962.
The United States carries out a brisk trade in automobile exports and imports, primarily with traditionally friendly countries including Japan, Germany and South Korea. Car companies, and their suppliers, from Germany and Japan are big users of the FTZ Program and punitive tariffs on their parts will be an unwelcome expense.
U.S.-based automakers and auto parts makers also manufacture products in Mexico and Canada and then import them into the United States.
"I wonder how much this has got to do ... with Mexico and Canada," John Woods, CIO of Credit Suisse, told CNBC's Bernie Lo. "I suspect there is some leverage going on" that's designed to increase pressure on those countries as they try to renegotiate the North American Free Trade Agreement with the United States. In Tokyo, Japanese automakers, which had been under pressure from the firmer yen, saw stock market declines: Toyota Motor and Honda Motor were both lower on their home market by more than 2 percent.
Mitsubishi Motors and Mazda Motor were hit especially hard, both falling more than 4 percent.
Stocks of South Korean automakers traded broadly lower in Seoul on Thursday, with Hyundai Motor and Kia Motors sliding.
"There is evidence suggesting that, for decades, imports from abroad have eroded our domestic auto industry," Commerce Secretary Wilbur Ross said in a statement.
The Commerce Department announcement said the investigation "will consider whether the decline of domestic automobile and automotive parts production threatens to weaken the internal economy of the United States, including by potentially reducing research, development, and jobs for skilled workers in connected vehicle systems, autonomous vehicles, fuel cells, electric motors and storage, advanced manufacturing processes, and other cutting-edge technologies."
The department claimed in the statement that imported passenger vehicles account for 48 percent of passenger vehicles sold in the United States, up from 32 percent 20 years ago, while "employment in motor vehicle production declined by 22 percent."
Minutes before the announcement, the White House released a statement saying that President Donald Trump asked Ross for the probe.
"Core industries such as automobiles and automotive parts are critical to our strength as a Nation," the White House statement said. Hours before though the President tweeted "Big news coming soon for our great American Autoworkers. After many decades of losing your jobs to other countries, you have waited long enough." Reports came out at the same time that North American Free Trade Agreement talks between Mexico, Canada, and the U.S. have stalled over auto manufacturing rules.
Two Washington D.C.-based automaker groups are slamming President Donald Trump's decision to launch an investigation into auto imports, which could lead to tariffs on foreign-made vehicles.
"To our knowledge, no one is asking for this protection. If these tariffs are imposed, consumers are going to take a big hit," said John Bozella, President of Global Automakers, a trade group representing foreign manufacturers doing business in the U.S. "This course of action will undermine the health and competitiveness of the U.S. auto industry."
The legal mechanism for the investigation "has rarely been used and traditionally has not focused on finished products," said Gloria Bergquist, spokeswoman for Auto Alliance, a group that represents foreign automakers like Volkswagen and BMW in addition to U.S. manufacturers like GM and Ford.
"We are confident that vehicle imports do not pose a national security risk to the U.S.," Bergquist said, and automakers' advocates argue that domestic production remains strong.
"Contrary to the assumption underlying the investigation on import vehicles, the U.S. auto industry is thriving," Bozella said.
"Last year, 13 domestic and international automakers manufactured nearly 12 million vehicles in the U.S. The auto sector remains the leading exporter of manufactured goods in our country," Bergquist said. "During the last 25 years, 15 new manufacturing plants have been launched in the U.S. – resulting in the creation of an additional 50,000 direct and 350,000 indirect auto jobs throughout America – and new plants are on the way."
"We urge the Administration to support policies that remove barriers to free trade and we will continue to work with them and provide input to achieve that goal," she said.
China announced last night that it would sharply cut tariffs on July 1 for an eclectic array of imported goods. China has a $375 billion bilateral trade surplus with the United States.
The tariff cuts came less than two days before Commerce Secretary Wilbur Ross is due in Beijing for wide-ranging talks aimed at addressing American frustrations with China’s $375 billion bilateral trade surplus with the United States. But the categories the Chinese Finance Ministry selected for tariff cuts cover few American goods, and appeared to be targeted at China’s goal of developing sophisticated industries rather than low-value mass manufacturing.
The moves came as China and the United States, the world’s two biggest economies, continued their wide-ranging economic and diplomatic sparring. The countries have alternated between attacking each other over trade issues and working together on efforts to rid North Korea of its nuclear weapons. At times, President Trump has praised his Chinese counterpart, Xi Jinping, at other times he has swiftly criticized Beijing for its trade practices, sometimes in quick succession. In its latest action, China may be making a modest peace offering, without really giving up much.
Some of the 1,449 categories of goods slated for tariff cuts involve food products from other countries, like fish, olives and grilled seaweed. Other categories include low-value manufactured goods like handbags and certain inexpensive garments, typically made in factories that have already been shifting from China to lower-wage competitors like Bangladesh, Ethiopia, India and Vietnam.
Chinese workers’ wages have soared over the past 15 years, and Beijing is engaged in a broad effort to steer the economy toward high-wage industries like semiconductors and away from factories making garments and handbags.
“The goods seeing cuts are not relevant to trade with the U.S.,” said Derek Scissors, a trade specialist at the American Enterprise Institute, a Washington think tank. “For China, it fits the goal of moving up the value chain — heavy subsidies for semiconductors and now less protection for textiles and consumer appliances.”
The Chinese move could nonetheless have political benefits for Beijing.
China is energetically trying to rally other governments to its side in its showdown with the United States. Beijing’s latest move could assuage concerns from many European countries and developing nations about their own trade deficits with China as well as loss of manufacturing jobs. At the same time, trade ministers elsewhere have been deeply troubled by the Trump administration’s moves to impose tariffs on steel and aluminum imported from around the world.
The announcement came just before Commerce Secretary Wilbur Ross announced in Washington that the United States would begin imposing tariffs on steel and aluminum from Canada, Mexico and the European Union at midnight on Thursday.
President Trump had issued a statement on Tuesday threatening further tariffs on Chinese goods and contending that China’s average tariff on imports was more than three times as high as that of in the United States, an assertion supported by World Trade Organization data. And China’s tariff average is nearly double that of the European Union.
But by cutting tariffs in more than 1,000 lightly traded categories, China could end up reducing its average tariff considerably without actually running the risk of a big surge in imports.
The announcement in Beijing this week followed a recent decision by China to cut its tariff on imported cars to 15 percent from 25 percent. President Trump also criticized the Chinese car tariff on Tuesday, noting that the American tariff on imported cars was just 2.5 percent.
Earlier this month House Speaker Paul Ryan's informal deadline for Mexican, Canadian and American commerce officials to restructure the North American Free Trade Agreement expired without a deal.
And that's left lawmakers, businesses and interest groups stuck in limbo.
Ryan had said that lawmakers in Congress would need to see a finalized NAFTA package from the three North American trade delegations in May in order to work a vote into an already tight legislative calendar, which will be made all the more complicated by what are expected to be contentious midterm elections in November. Any finalized deal must be ratified by Congress to take effect.
By missing the deadline, Ryan suggested the new NAFTA deal would essentially become a trillion-dollar problem for the next Congress to tackle in 2019.
"Clearly, if there isn't an agreement soon, we're not going to be dealing with it during this Congress," Rep. Suzan DelBene, D-Wash., said Wednesday at a NAFTA-focused event hosted by The Hill digital media outlet. "Frankly, the fact that there isn't an agreement right now probably doesn't bode well for it getting done before the end of this Congress."
And that lack of certainty is problematic in the eyes of some experts who believe prolonging the process further will continue to hurt business in all three NAFTA countries. There's also still no guarantee that this or the next Congress will sign off on any potential deal negotiated by North American trade officials – nor is there certainty that President Donald Trump won't decide at some point to torpedo the deal entirely.
It was a gray Memorial Day here in your Nation’s Capital; weather perhaps reflective of the somber occasion. The holiday found the FTZine staff in Gettysburg, site of Robert E. Lee’s bold incursion above the Mason-Dixon Line and one of the bloodiest battles in American history. There we captured the solemn scene above with flags certifying that in the struggle to form a more perfect union, all are patriots.