(Bloomberg) -- President Donald Trump has pulled out all the stops to protect the U.S. steel industry. By proposing 25 percent tariffs on all imports, he’s riled many of America’s closest allies in Europe. Here are some of the reasons they are worried.
Global steel markets are fluid. In a world that’s already producing more of the metal than it needs, closing the doors of the world’s biggest steel importer is likely to have widespread ripple effects. The U.S. imports about 30 million tons every year, and European producers worry where those volumes might end up.
Eurofer, the steelmakers lobby, has said that should Europe become a target for deflected exports it would have a “huge impact” on the region’s industry, which employs more than 320,000 people. Europe currently imports about 40 million tons a year.
After Canada, the European Union is the biggest exporter of steel to the U.S.,. selling about 5 million tons to the country (or about 15 percent of its imports). Given that European producers make more than 160 million tons of the metal every year, the loss of 5 million tons of exports is unlikely to bring the industry to its knees. Still many of those products are at the higher end of the value chain. Societe Generale SA identifies Germany’s Thyssenkrupp AG and Austria’s Voestalpine AG as exporters of high-quality steel to the U.S.
In January, the EU said that any curbs on its imports would be met by rapid retaliation, and Germany’s business lobby has already called on the EU to push back. Norway’s foreign ministry said national security isn’t a sound justification for trade barriers, and warned about indirect consequences.
While Europe traditionally moves more slowly on trade defenses than the U.S., it has been ratcheting up its own protection in recent years. As Chinese steel exports hit record levels, Europe has expanded tariffs to countries such as Russia, Ukraine, Brazil and Iran. The move by Trump is likely to accelerate these policies and may actually help domestic producers.
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