From midnight tonight the US will impose a 25% tax import tariffs on steel and 10% tax on aluminium from the EU, Mexico and Canada.
This represents a major blow to the EU, Mexico and Canada all of whom had been frantically lobbying the US to drop the proposed tariffs. There have been threats of retribution and retaliatory tariffs, which some experts have stated could lead to an out and out trade war.
Cause of the dispute
Since the financial crisis there has been an over supply of steel production throughout the world, which has lowered prices and made it more difficult for US produces to compete against imports. Although some have argued this is part of a wider trade cycle with need for adjustment from US producers, President Trump has deemed the production of Steel and Aluminum a matter of national security. The US therefore states the tariffs are essential to protect its long term strategic interests.
A negotiating tactic?
It has been argued that this draconian measure is a mere negotiating tactic by the Trump administration, as they have threatened such tariffs on several other countries and subsequently reached an agreement for the countries to voluntarily agree an export limit to the US. If this is a negotiating tactic it is the equivalent of jumping from a plane without a parachute; Very high risk for all involved
Possible repercussions for the UK steel industry
Currently 15% of UK steel exports end up in the US, and whilst tariffs would directly effect these exports, more importantly all the surplus steel from Canada, Mexico and the rest of the EU would further suppress UK domestic prices and production.
Although UK steel production is one of of the most efficient in the world and even if the UK (as part of the EU) agree to limit exports to the US and avoid tariffs there will be other direct negative effects, such as surplus international supply flooding the UK market.
Perhaps the Trump administration is correct and that domestic steel and aluminum production is vital the strategic national interest, if so it is surely time the UK government gave these industries the additional support they need.