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News > World

Trump Taxes Biggest U.S. Trade Partners, So They Strike Back

  • U.S. President Donald Trump during the World Economic Forum annual meeting in Davos, January 2018.

    U.S. President Donald Trump during the World Economic Forum annual meeting in Davos, January 2018. | Photo: Reuters

Published 31 May 2018

The Trump administration has started a trade tiff with its top commerce partners – the EU, Canada and Mexico – in the name of national security.

The administration of U.S. President Donald Trump is placing major aluminum and steel tariffs on three of its biggest trading partners – the EU, Canada and Mexico – and all three are retaliating in response.

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The reason for the tariffs against longtime trade and diplomatic allies: national security. As EU Commission President Jean-Claude Juncker said on Thursday: "This is a bad day for world trade."

Sensing Trump's trade war stunt, Juncker said the EU will move forward with plans to implement import taxes on U.S. bourbon, motorcycles and peanut butter.

"Our U.S. friends must know that if they were to take aggressive actions against Europe, Europe would not be without reaction," said France's finance minister, Bruno Le Maire, in Paris. France's junior trade minister, Jean-Baptiste Lemoyne, told reporters: "The EU is united."

"While some leaders are enjoying themselves with measures that amount to muscle-flexing and are pointing fingers at allies, what will happen in real life? These tariffs will increase the cost of products and in the end who will pay the bill? The consumer, the American consumer," Lemoyne said.

On Wednesday, French President Emmanuel Macron warned that the World Trade Organization must reform to prevent a looming trade war.

Canadian Prime Minister Justin Trudeau said: "That Canada could be considered a national security threat to the United States is inconceivable." His government may increase tariffs on some US$12.8 billion of U.S. aluminum, steel and household products, such as detergents, entering Canada.

The United States' third-biggest trade partner and NAFTA member, Mexico, is planning to retaliate "proportionately," strategically introducing import taxes on pork legs, apples, grapes, cheese and steel – products from Midwestern states that supported Trump in the 2016 election.

Economy Minister Ildefonso Guajardo said: "In the end, the effect will fall on voters and citizens that live in districts where the people have a voice and vote in the Congress."

Critics say the U.S. president is damaging the already haltingly slow NAFTA negotiations: "This marks a significant escalation... the first big shot in the long-feared trade war," Edward Alden, a senior fellow at the Council on Foreign Relations in Washington, told the Financial Times.

Washington plans to place a 25 percent duty on steel and 10 percent tax on aluminum, which it initially threatened to do against China.

Chad Bown, a senior fellow at the Peterson Institute for International Economics, said: "This is primarily now only attacking our economic and military allies."

The EU is the United States' biggest trading partner, racking up nearly US$720 billion in commerce costs last year compared to the US$636 billion in trade U.S. companies did with China. Its NAFTA partners traded a combined US$1.1 trillion with its neighbor in the middle.

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