The European Union is poised to drag Britain into a damaging trade war with the United States, as Brussels prepares to retaliate against measures designed to protect American metalworkers.
President Donald Trump’s administration has decided to levy tariffs of 25 per cent and 10 per cent on foreign steel and aluminium, mainly in order to protect American workers from being undercut by Chinese industry, which is subsidised by the Communist regime to overproduce and then dumps its excess product on world markets.
However, because the ‘Most Favoured Nation’ rules of the World Trade Organization (WTO) require tariffs to be levied at the same rate for all third-party countries, these charges will also apply to European Union countries, including Britain.
This could be avoided by a free trade agreement, but the EU has failed to negotiate one with the U.S., and Brussels does not allow individual member-states to negotiate their own trade deals.
The European Union has taken a hostile line in response, threatening a “trade war”.
“The Commission will bring forward in the next few days a proposal for World Trade Organization-compatible countermeasures against the U.S. to rebalance the situation,” vowed Jean-Claude Juncker, who heads the unelected European Commission.
“The EU has been a close security ally of the U.S. for decades. We will not sit idly while our industry is hit with unfair measures that put thousands of European jobs at risk. I had the occasion to say that the EU would react adequately and that’s what we will do,” he said.
European Commission Vice-President Jyrki Katainen has confessed the effects will extend beyond U.S.-EU relations, however, with the bloc being required to adopt “safeguarding measures” of its own to stop Europe from being flooded with Asian and South American steel which can no longer be dumped on the U.S., thanks to Trump’s tariffs.
“I easily can see very unfortunate and worrisome developments ahead of us,” Katainen admitted. “[W]e can end up easily in a situation where we are in a trade war with the two fronts … because of one decision made by the president of the United States.”
President Trump, for his part, was bullish about the prospect of a “trade war”, tweeting: “When a country (USA) is losing many billions of dollars on trade with virtually every country it does business with, trade wars are good, and easy to win. Example, when we are down $100 billion with a certain country and they get cute, don’t trade anymore — we win big. It’s easy!”
The United Kingdom is unlikely to be able to benefit from this sort of economic nationalism while it is still in the European Union, or during the mooted ‘transition period’ after Brexit.
While EU-level tariffs will offer some protection against producers outside the bloc, Britain cannot protect itself from Continental producers, who are often more lax about enforcing expensive Single Market rules than their British counterparts.
The British government is also prevented from favouring British steel for public contracts by EU competition and tendering rules — so much so that even the scaffolding around the Elizabeth Tower which houses Big Ben uses foreign steel.
It is likely that Continental producers will focus on the British market even more if a new tariff regime impacts their competitiveness outside Europe, which could put British industry in jeopardy.
Britain is already down to its last aluminium smelter, and the steel industry — which enjoyed a mild recovery after the EU referendum due to the fall in sterling boosting competitiveness — remains vulnerable.