Trump Invites `Easy to Win' Trade War as Tariff Anger Spreads
U.S. President Donald Trump speaks during a meeting with bipartisan members of Congress to discuss school and community safety in the Cabinet Room of the White House in Washington, D.C., U.S. (Photographer: Joshua Roberts/Bloomberg)  

Trump Invites `Easy to Win' Trade War as Tariff Anger Spreads

(Bloomberg) -- President Donald Trump invited a trade war after slapping tariffs on steel and aluminum imports, daring other countries to act on threats of retaliation.

“When a country (USA) is losing many billions of dollars on trade with virtually every country it does business with, trade wars are good, and easy to win,” Trump said in an early morning tweet on Friday.

Trump is facing anger from manufacturers and trade partners in China and Europe after announcing tariffs of 25 percent on imported steel and 10 percent on aluminum for “a long period of time.” The formal order is expected to be signed next week.

Republican Senator Ben Sasse of Nebraska cautioned “Trade wars are never won. Trade wars are lost by both sides,” in a statement. “If the President goes through with this, it will kill American jobs -- that’s what every trade war ultimately does. So much losing.”

Trump in a follow-up tweet Monday morning warned of more trade actions ahead, casting them as reciprocal taxes, a term he has used for imposing levies on imports from countries that charge higher duties on U.S. goods than the U.S. currently charges.

“We will soon be starting RECIPROCAL TAXES so that we will charge the same thing as they charge us. $800 Billion Trade Deficit-have no choice!” Trump said in the tweet.

The aggressive stance has stoked fears of trade retaliation and roiled global markets. The U.S. dollar weakened for a second day against a basket of currencies, while equity markets across the U.S., Asia and Europe have declined.

Trump hasn’t given the details of his proposed action on steel and aluminum tariffs, including whether any products or countries would be exempted.

The planned tariffs, justified on the basis that cut-price metals imports hurt both American producers and national security, now raise the prospect of retaliatory curbs on American exports and higher prices for domestic users. While the practical impact may yet turn out to be limited, the political environment for global trade has just taken a turn for the worse.

European equities followed Asian markets lower on Friday after losses in the U.S. the day before. Europe’s Stoxx 600 fell 0.7 percent, with many automakers and basic resource companies among major decliners. The S&P 500 was down more than 1 percent at 9:45 a.m. New York time.

Trump Invites `Easy to Win' Trade War as Tariff Anger Spreads

Asian stocks had already built on losses seen in the U.S. the previous day, with shares in Hong Kong, Japan, China, Australia and South Korea weaker. Separately, the yen spiked and Japanese assets slumped after Bank of Japan Governor Haruhiko Kuroda discussed the timing of a possible exit from its stimulus policy in parliament.

The official response in China, the world’s largest steel producer, was muted. Foreign Ministry spokeswoman Hua Chunying merely said in Beijing Friday that China urges the U.S. to follow trade rules.

Industry insiders were less restrained. The U.S. measures “overturn the international trade order,” Wen Xianjun, vice chairman of the China Nonferrous Metals Industry Association, said in a statement. “Other countries, including China, will take relevant retaliatory measures.”

Li Xinchuang, the vice chairman of China Iron and Steel Association, called the move “stupid.”

Trump Invites `Easy to Win' Trade War as Tariff Anger Spreads

U.S. allies, seeing their industries threatened, responded with bafflement and dismay. Some also panned the idea that metals imports pose a threat to national security.

“Steel and aluminum imports from Japan, which is an ally, do not affect U.S. national security at all,” Japan’s Trade Minister Hiroshige Seko told reporters in Tokyo Friday. “I would like to convey that to the U.S. when I have an opportunity.”

Canada -- the biggest foreign supplier of steel and aluminum to the U.S. -- said the measures were unacceptable while the European Union vowed to “react firmly” with World Trade Organization-compliant countermeasures in the next few days. Australian Trade Minister Steve Ciobo called the move “disappointing” and said his country is seeking an exemption.

The punitive measures would level the unfair playing field that has persisted for years, and make it easier for American companies to expand and hire workers, Trump said.

U.S. companies from beer brewer MillerCoors to candymaker Hershey Co., which use aluminum for manufacturing and packaging, said operations would be hurt by the tariffs.

“We buy as much domestic can sheet aluminum as is available, however, there simply isn’t enough supply to satisfy the demands of American beverage makers like us,” MillerCoors said in a tweet. “American workers and American consumers will suffer as a result of this misguided tariff.”

Soybean Response

A U.S. move on tariffs risks provoking retaliation, particularly from Beijing. China has already launched a probe into U.S. imports of sorghum, and is studying whether to restrict shipments of U.S. soybeans -- targets that could hurt Trump’s support in some farming states. While China accounts for just a fraction of U.S. imports of the metals, it’s accused of flooding the global market and dragging down prices.

What Our Economists Say...

“China’s total exports of steel and aluminum are equal to about 0.5% of GDP, most of that from steel,” said Bloomberg’s Chief Asia Economist Tom Orlik. “Relative to fears from Trump’s campaign trail rhetoric, in which he threatened an across-the-board 45% tariff on all imports from China, these measures are extremely limited.”

Trump announced the tariffs despite lobbying of his administration by foreign governments, and while Chinese President Xi Jinping’s top economic adviser is in the country on a mission to defuse tensions.

The impact of the step hinges in part on which nations will be affected, said Alex Wolf, senior emerging markets economist at Aberdeen Standard Investments in Hong Kong, who previously worked at the U.S. State Department.

“It’s not much ado about nothing,” he said. "But until we see the final scope of the tariffs and the response from global trading partners it’s hard to say it’s the start of a tit-for-tat trade war."

©2018 Bloomberg L.P.

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