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EU, IMF and WTO to Trump: Trade wars are 'easy to lose'

March 7, 2018

The EU has said US tariffs would be met with a "proportionate response." The European Council, IMF and WTO have warned Trump he is very wrong about trade wars being easy to win.


EU threatens US with tariffs on popular products

The European Commission on Wednesday presented its strategy for responding to US President Donald Trump's planned tariffs on steel and aluminum imports. Plans included possible measures targetting US products like peanut butter, orange juice and bourbon whisky.

European Council President Donald Tusk hit back at Trump, saying trade wars are "easy to lose," and that the EU would retaliate against the planned US steel and aluminum tariffs.

Read more: Opinion: Trump, tariffs and reality

"President Trump has recently said, and I quote, 'trade wars are good and easy to win' but the truth is quite the opposite. Trade wars are bad and easy to lose," Tusk told a press conference in Luxembourg.

US steel tariffs: A new trade war?

Tusk warned Trump that the tariffs could result in "a serious trade dispute" between Washington and the rest of the world.

He suggested that there should be "an extraordinary trade debate" over possible "repercussions for our citizens and our businesses not to mention the global economy," at an upcoming EU leaders summit in Brussels this month.

EU trade commissioner responds

"We ... hope to convince the US administration that this is not the right move," EU Trade Commissioner Cecilia Malmstrom said. 

"But we have made clear that if a move like this is taken, it will hurt the European Union, it will put thousands of European jobs in jeopardy, and it has to be met by a firm and proportionate response," she added.

US motive an 'economic safeguard'

Trump's motivations did not appear compatible with World Trade Organization (WTO) rules and that meant the EU could take precautions to protect its own markets, Malmstroem said.

She added that the EU "seriously doubts" Trump wanted tariffs on steel for national security reasons.

"We have serious doubts about that justification. We cannot see how the European Union, friends and allies in NATO, can be a threat to international security in the US," Malmstrom said.

"From what we understand, the motivation of the US is an economic safeguard measure in disguise, not a national security measure," she added.

EU's Trump tariffs riposte based on WTO rules

WTO without the US?

The chairman of the European parliament's Committee on International Trade, Bernd Lange, echoed Malmstroem's criticism regarding the violation of WTO rules, saying: "This is not about anti-dumping measures, rather it is about closing off access to the US market. That is clearly a violation of WTO rules."

Lange even spoke of a future in which the US would no longer be a member of the WTO if the president insisted on flouting the body's rules. Trump himself has repeatedly threatened to leave the WTO in order to secure more favorable bilateral trade agreements for the US. 

Know your history

In her remarks, Malmstroem made a point of referencing former US President George W. Bush's anti-dumping tariffs from 2002. The result of that decision cost thousands of jobs and led to the decimation of the US steel industry: "I hope someone in the White House reminds him of that."

Chances of internal resistance to protectionism within the Trump administration grew more unlikely when top economic advisor Gary Cohn announced his pending resignation Tuesday. Cohn, a Democrat, was one of the few people in the administration who vocally championed free trade. The stance drew an increasing amount of derision from the president, who chided him for being a "globalist."  

Concrete steps

Trade Commissioner Malmstroem promised three steps would be taken by the EU should Trump follow through with the threat of raising import tariffs, saying:

1. The EU will lodge a formal complaint with the WTO, possibly alongside other steel and aluminum producing countries like Canada, Brazil, Japan and China.

2. The EU will reciprocally raise import tariffs on US steel and aluminum.

3. The EU will raise tariffs on US-made motorcycles, bourbon whisky, jeans, peanut butter, cranberries, orange juice and other iconic US products in an effort to offset European economic loses.

Speaking of the measures, Malmstroem said that the European Commission is responsible for protecting EU jobs. She emphasized her lack of desire to impose such new tariffs but added she may have no choice in the matter: "We really don't want to, but we cannot remain silent."

International warnings

The EU was not the only international entity to voice concern over a looming trade war. On Wednesday, Christine Lagarde, managing director of the International Monetary Fund (IMF), warned: "In a so-called trade war … nobody wins, one generally finds loser on both sides." She said that a trade war would cause "formidable" damage to global economic growth.

Speaking in Geneva, where a number of countries, among them China, voiced concern about Trump's threats, World Trade Organization spokesman Keith Rockwell said: "Many said they feared a tit-for-tat retaliation which could spiral out of control, damaging the global economy and the multilateral trading system."

Canada's ambassador to the WTO was quoted as saying: "We fear that the United States may be opening a Pandora's Box that we would not be able to close."

How the commotion began 

Last Thursday Trump declared that the US would impose a 25-percent tariff on steel imports and a 10-percent tariff on aluminum.

Then on Saturday, he tweeted that the US would place "a tax" on European cars that "freely pour into the US" if the EU further increased tariffs. Trade Commissioner Malmstroem countered that argument by warning that such a move could lead to thousands of job losses at European automobile manufacturers, many of whom have major production facilities in the USA.

She also cited the fact that although import tariffs on European cars are indeed low, that is offset by much higher import tariffs on European trucks. 

js,law/sms (AFP, AP, dpa)

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