Trump's tariffs keep allies, markets and industry guessing

Many of them had spent the previous two weeks frantically lobbying the administration for a permanent exemption, but the White House said late Thursday that those nations would have until May 1 to negotiate “satisfactory alternative means” to address the national security threat that America faced from a reliance on foreign metals.

In addition to the metals tariffs, the White House announced levies on up to $60 billion worth of Chinese imports, a move that provoked immediate promises of retaliation by China and sent stock markets into a tailspin. On Saturday morning, the Chinese vice premier for financial and industrial policy, Liu He, told Treasury Secretary Steven Mnuchin in a phone call that the United States’ actions against China violate international trade rules and run counter to American, Chinese and global interests. He warned that China has the strength to defend its national interests.

On Friday, Trump boasted that his approach would produce better trade deals for the United States, including what he said was a breakthrough in negotiations with South Korea. “Some tremendous trade deals are being made with various countries,” he said. “We’re negotiating very long, very hard, but very quickly.”

But it is far from clear that such agreements will be completed and, if they are, who will be on the winning end.

What is increasingly clear to many on Capitol Hill and in the business community is that the White House is seizing on trade as a negotiating tool, trying to use the nation’s economic dominance as leverage to pressure other countries to bend to its will.

“Trump prefers to negotiate at the point of a gun,” said Robert E. Scott, a senior economist at the liberal Economic Policy Institute in Washington. But he questioned the wisdom of not outlining the goals of the negotiation at the outset, particularly with allies.

“I think it would have been better to make this explicit when they laid out the tariffs,” Scott said.

The approach is rattling some of Trump’s otherwise ardent supporters, who worry that his unpredictable trade actions could hurt many of the industries and workers he has pledged to protect.

“While serious problems persist in the global steel market, President Trump’s steel and aluminum tariffs were a blunt and misaimed response,” J.D. Foster, the chief economist for the U.S. Chamber of Commerce, wrote Friday morning.

Administration officials seem to see the chaos and fallout from blunt trade moves as a cost of doing business in a global economy.

Robert E. Lighthizer, the U.S. trade representative, struggled Thursday to soothe farm-state senators on the Finance Committee who worried about Chinese retaliation against their constituents’ products.

“Every time we take a trade action, agriculture is in the crosshairs,” Lighthizer said. “It’s something we’re very sympathetic to,” he added, though he did not detail how the administration might try to mitigate that impact.

Commerce Secretary Wilbur Ross was similarly pressed Thursday by House Republicans and Democrats who, after U.S. companies were forced to apply for steel and aluminum tariff exemptions, called it a chaotic process.

Rep. Peter Roskam, R-Ill., described the “ashen” faces he had seen at a company that was being forced to apply for individual exclusions for a large number of the imported products it needed.

Ross offered him little comfort. “It’s the best we could do, sir,” he said, referring to the department’s process for evaluation of those applications.

Ross later rattled free-trade Republicans when, on CNBC, he agreed that the Chinese tariffs would produce “some ultimate retaliation, but I don’t think it’s going to be the end of the earth.”

Nervous Republicans on Capitol Hill say the administration’s frequently and hastily altered plans to impose the tariffs suggest Trump and his aides are devising trade policy on the fly. Even some supporters of the tariffs say it is unclear from the outside how Trump plans to leverage them to bring about a broader global offensive against the overproduction of the metals by countries such as China.

Other supporters remain optimistic that Trump will succeed in using the threat of tariffs to win concessions from trading partners that benefit America.

Trump has long argued that China is cheating under the global rules of trade and has vowed to reduce the United States’ trade deficit with China and other countries. The administration has accused China of flooding the world market with cheap steel, which can make its way to the United States after landing in another country. That argument is what motivated Trump’s initial declaration last month that he would impose what is effectively a tax of 25 percent on imported steel and 10 percent on imported aluminum from every country in the world.

He has since backtracked, in a series of decisions that have stirred chaos in Washington and abroad. On Thursday, the United States temporarily exempted the European Union, Canada, Mexico, South Korea, Australia, Argentina and Brazil from the tariffs. And the White House raised the specter of another showdown, saying that the tariffs would be lifted only until May 1, pending negotiations, and that it could impose quotas on metal imports from those countries at any point.

Inside and outside Congress, trade experts have found themselves guessing at what is coming next on trade, and whether Trump has a broader strategy.

A theory in trade policy circles is that Trump may have announced the tariffs — and set the window for negotiating with allies who are initially exempted — to pressure those allies to impose their own tariffs on steel and aluminum on countries like China and South Korea. Those countries have been identified by the Commerce Department as the worst offenders in global overproduction of those metals.

“Clearly, those are the countries that are the source of most excess capacity,” Scott said. “So the best thing to do would be to find a way to circle the wagons, and wall off the rest of the world from those bad actors.”

If that is the administration’s goal, it has chosen a curious route to it. For one, it has thus far denied an exemption to Japan, a prominent ally and now America’s largest source of steel that still faces the tariffs. And it temporarily exempted South Korea, which most trade hawks consider a major source of the steel overcapacity problem.

The Korean inclusion points to a second possible strategy, one that is less about walling off excess steel in China and more about using the metals tariffs as a weapon to win trade concessions from individual partners. Ross seemed to offer some clues Friday that this was the strategy, when he said a new trade agreement with South Korea would address the tariffs — known in trade jargon as Section 232 — and other issues.

“We believe we are relatively close to a pretty comprehensive resolution with the South Korean government,” Ross said. “It will encompass, if it goes through, both the 232s and broader trade issues. And we hope by sometime next week to be able to have a real announcement.”

This article originally appeared in The New York Times.

Trump's tariffs keep allies, markets and industry guessing

Just one day before stiff steel and aluminum tariffs were set to go into effect, Trump offered a temporary 11th-hour reprieve to several allies, including some of the biggest foreign suppliers of steel.

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