(Bloomberg) -- The European Union and businesses warned of more market uncertainty following the Trump administration’s decision to delay U.S. steel and aluminum tariffs for the next month.
President Donald Trump left the world in limbo on Monday until just hours before temporary tariff exemptions for the metals were due to expire for key allies. In a presidential proclamation, Trump allowed another 30 days for the EU, Canada and Mexico to continue negotiations for permanent exemptions.
The EU’s frustration continued over tariffs the U.S. has justified on national security grounds. Last week, French President Emmanuel Macron and German Chancellor Angela Merkel both made their case to Trump for why the EU bloc should get permanent and unconditional relief from the tariffs, partly arguing that they are America’s security partners.
“The U.S. decision prolongs market uncertainty, which is already affecting business decisions,” the European Commission said in a statement on Tuesday. “The EU should be fully and permanently exempted from these measures, as they cannot be justified on the grounds of national security.”
Commerce Secretary Wilbur Ross said the talks over steel and aluminum tariffs with the EU are forcing a productive conversation about the wider trading relationship. He said he didn’t expect the U.S. will keep adding extensions.
“We’re having very productive discussions, and we’re hopeful that we can come to a mutually agreeable resolution that will protect the national security interest in steel and aluminum,” Ross said in an interview with Bloomberg Television on Tuesday. Ross said he’ll continue speaking with EU trade chief Cecilia Malmstrom, which they’ve done nearly every day since the tariffs were announced.
With the extension leaving the door open to more permanent arrangements, shares in U.S. steelmakers dropped Tuesday. AK Steel Holding Corp. declined the most almost six weeks, falling 6.2 percent, while U.S. Steel Corp. slipped 4.9 percent as of 3:06 p.m. in New York.
The president’s decision to delay the tariffs gives the White House breathing room as it weighs leaving the Iran nuclear accord and prepares for disarmament talks with North Korea’s Kim Jong Un. It also frees time for another of the administration’s top priorities: Treasury Secretary Steven Mnuchin will lead a contingent of cabinet members to China this week to try to head off a brewing trade dispute between the world’s two biggest economies.
Trump tweeted Tuesday that there was “great potential” for the U.S. in addressing the trade disparities with other countries.
“Delegation heading to China to begin talks on the Massive Trade Deficit that has been created with our Country,” Trump said. “Very much like North Korea, this should have been fixed years ago, not now. Same with other countries and NAFTA...but it will all get done.”
Trump has dangled a permanent exemption as incentive to reach a tentative Nafta deal with Mexico and Canada, though talks continue with no immediate agreement in sight. America’s two Nafta partners won’t receive further extensions after the June 1 deadline, White House trade adviser Peter Navarro told a conference in Washington on Tuesday.
The Aluminum Association of Canada said the industry needs assurances from the U.S. over tariffs as quickly as possible to protect supply chains that have grown increasingly connected over past half century.
“As a strategic ally to the United States, nothing less than a permanent and total exemption is required as soon as possible,” the association said in a statement on Tuesday. “We need certainty in order for the integrated manufacturing supply chain -- that both countries helped build over the last 50 years -- to work well and keep North America competitive.”
The Washington-based Beer Institute, which represents the American brewing industry, repeated its criticism of the tariffs, which it say will drive up their production costs.
“The tariffs are already having an immediate and disproportionate impact on American brewers and American jobs,” the institute said in statement on Tuesday.
European officials have said the U.S. tariffs violate international trading rules, and they have threatened to retaliate with levies on iconic American brands such as Harley-Davidson motorcycles and Kentucky bourbon.
The White House also announced on Monday that it’s made a tentative agreement to remove the steel and aluminum tariffs for Australia, Argentina and Brazil, which should be finalized soon. It confirmed that it would spare South Korea from steel duties after Seoul accepted a quota of 70 percent of the average of its steel exported to the U.S. between 2015 and 2017. Ross said on Tuesday the 10 percent aluminum tariff will apply to South Korean shipments.
Argentina’s Production Minister Francisco Cabrera said on Tuesday that the country agreed to a quota of 180,000 metric tons per year for both steel and aluminum shipments to be exempted from Trump’s tariffs. “This is a big success for us, our products will not be reached by the U.S. tariffs,” Cabrera said in Buenos Aires.
Trump’s embrace of trade barriers this year has sparked fears of tit-for-tat retaliation that could undermine consumer confidence and stymie the strongest global economic expansion in years.
The dispute comes as Washington seeks to stave off a separate trade conflict with China. The president has threatened to slap tariffs on as much as $150 billion in Chinese imports in retaliation for alleged violations of intellectual property, while Beijing has vowed to retaliate.
Steel and aluminum exporters from China, along with other metal-exporting nations such as Japan and India, have been paying the U.S. tariffs since late March. The U.S. and EU have complained for years that Chinese steel producers unfairly benefit from state subsidies and dump their products on the world market.
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