The International Monetary Fund and European leaders pushed back Wednesday against U.S. President Donald Trump’s plan to impose steep tariffs on steel and aluminum imports, saying it would provoke a calamitous global trade war.
IMF chief Christine Lagarde told a European radio interviewer, “If international trade is called into question by these types of measures, it will be a transmission channel for a drop in growth, a drop in trade and it will be fearsome. In a trade war that will be fed by reciprocal increases of customs tariffs, no one wins.”
Lagarde said the IMF is “anxious” that U.S. tariff increases not be imposed, saying, “We are urging the sides to reach agreements, hold negotiations, consultations.”
Trump boasted last week that trade wars “are good and easy to win” after he announced plans for a 25 percent U.S. tariff on steel imports and a 10 percent levy on aluminum exported to the United States.
The proposal has drawn widespread criticism from his normal Republican colleagues in Congress and U.S. foreign allies, but support from economic nationalists in the United States and a handful of Democratic lawmakers in manufacturing states whose fortunes could be boosted by the tariffs protecting their metal industries.
European Council President Donald Tusk rebutted Trump’s contention about trade conflicts, saying, “The truth is quite the opposite: Trade wars are bad and easy to lose. For this reason I strongly believe that now is the time for politicians on both sides of the Atlantic to act responsibly.”
The European Commission, the executive arm of the 28-nation European Union, detailed retaliatory tariffs it plans to impose on prominent U.S. products if Trump carries out his plan to impose the metal tariffs, taxing Harley-Davidson motorcycles, bourbon, blue jeans, cranberries, orange juice and peanut butter.
Trump has claimed the United States needs to impose the steel and aluminum tariffs to protect its national security, but European Trade Commissioner Cecilia Malmstroem dismissed his rationale.
“We cannot see how the European Union, friends and allies in NATO, can be a threat to international security in the U.S.,” Malmstroem said. “From what we understand, the motivation of the U.S. is an economic safeguard measure in disguise, not a national security measure.”
Denmark Foreign Minister Anders Samuelsen said if a trade war starts between the United States and the European Union, “at the end of the day, European and American consumers will pay for it. That is the signal we have to send to Trump that it is not a path we should follow.”
Moody’s Investors Service said the planned tariffs “raise the risk of a deterioration in global trade relations.”
Despite the criticism, White House Press Secretary Sarah Huckabee Sanders said Trump is “on track” to make the formal announcement on the tariffs by the end of the week.
Cutting the trade deficit
Trump said on Twitter that since former President George H.W. Bush was in the White House 30 years ago, “our Country has lost more than 55,000 factories, 6,000,000 manufacturing jobs and accumulated Trade Deficits of more than $12 trillion.”
Trump claimed the United States last year had a trade deficit of “almost $800 billion,” significantly overstating the actual figure of $566 billion, which still was the biggest U.S. trade deficit in nine years. A new report Wednesday said the U.S. trade deficit in January – the amount its imports exceeded its exports – reached $56.6 billion, the highest monthly total since October 2008.
“Bad Policies & Leadership. Must WIN again!” Trump said.
In another tweet, Trump said the United States has asked China “to develop a plan for the year of a One Billion Dollar reduction in their massive Trade Deficit with the United States. Our relationship with China has been a very good one, and we look forward to seeing what ideas they come back with. We must act soon!”
U.S. Commerce Secretary Wilbur Ross said the planned steel and aluminum tariffs were “thought through. We’re not looking for a trade war.”
He said the Trump administration could take a “surgical approach” to new tariffs, exempting some countries, specifically Canada and Mexico, if revisions are reached in the ongoing negotiations over changes in the 1994 North American Free Trade Agreement.
Ross added that it is “not inconceivable that others could be exempted on a similar basis.”
Stocks prices fell in the U.S. markets with the turmoil over the tariffs and the resignation Tuesday of Gary Cohn, Trump’s chief economic adviser, an economic globalist who had opposed the steel and aluminum tariffs, but lost the internal White House debate.
The Dow Jones Industrial Average of 30 key stocks dropped a half percentage point in early Wednesday trading and other markets dropped too.
Trump promised to quickly replace Cohn, saying, “Many people wanting the job — will choose wisely!”