Trump tariffs: Retaliate or negotiate - what will US partners do next? - Voice of Asia

U.S. President Donald Trump's decision to impose a 25% tariff on all steel and aluminum imports has prompted the U.S.'s major trading partners to seek agreements. The United States is a significant steel importer, with imports accounting for nearly a quarter of its consumption, according to the American Iron and Steel Institute, and it is even more reliant on aluminum. America's neighbors, Canada and Mexico, as well as some Asian allies, are its primary suppliers.

Trump stated that the latest tariffs would take effect on March 12 and that there would be "no exceptions or exemptions." With only a month until the tariffs take effect, countries have already begun to react. Canada, one of the largest suppliers of steel and aluminum to the United States, therefore faces significant losses. "Canada has extra reason to be aggrieved, as they are the largest steel supplier to the US, and one of the biggest aluminum suppliers as well," said Deborah Elms, a trade expert at the Hinrich Foundation.

Canadian Industry Minister François-Philippe Champagne slammed the decision, calling it "entirely unjustifiable." He stated on social media that Canadian steel is used in critical U.S. industries, including defense, shipbuilding, and energy, which makes "North America more competitive and secure." He also added that Canada will "defend our industries as we always have," and warned that Canada's response would be "clear and calibrated."

Although Trump had stated that he would not consider any exceptions, he appears likely to make an exception for Australia. Australian Prime Minister Anthony Albanese stated that he had spoken with Trump by phone and that the U.S. leader was considering granting an exemption. Trump called Albanese a "very good guy" and explained that the U.S. has a trade surplus with Australia. "The reason is they buy a lot of planes. They're far away, they need a lot of planes," Trump said. "We actually have a surplus, it's one of the few countries we have a surplus with." Although Australia is the world's largest exporter of iron ore—a key ingredient in steelmaking—its own steel exports are less significant. According to Albanese, Australian steel accounts for about 1% of U.S. imports, but its steel is used by a major U.S. military shipbuilder.

The UK government stated that it would "take a measured approach" and would discuss the details with the U.S., but made it clear that it would prioritize national interests. The UK will not take immediate retaliatory action, with Finance Minister Rachel Reeves stating that she is "convinced that an agreement can be reached." The UK Steel trade body said in a statement that the tariffs would be a "devastating blow" to their industry. "The U.S. is our second-largest export market after the EU. At a time of shrinking demand and high costs, the rise of global protectionism, especially in the U.S., will choke off our exports and undermine the steel industry’s contribution of over £400 million ($494 million) to the UK’s trade balance," said Gareth Stace, director general of UK Steel, in a statement. "If President Trump sees fit to target UK steel, given our relatively small production compared to major steel nations, it is deeply disappointing," he added, noting the risk that other countries might "re-route" steel "to the UK market to avoid US tariffs."

European Commission President Ursula von der Leyen responded on Tuesday that "unjustified tariffs on the EU will not be met with silence." "They will trigger a firm and proportionate response. The EU will act to defend its economic interests," she said. "I deeply regret the U.S. decision to impose tariffs on European steel and aluminum exports. Tariffs are taxes—bad for business and bad for consumers." According to trade body Eurometal, the U.S. is the EU's second-largest market for steel exports. Trump imposed tariffs on both the UK and the EU during his first term, but these restrictions were later eased by the Biden administration.

Indian Steel Ministry Secretary Sandeep Poundrik reportedly claimed that Trump's tariffs would not have much of an impact, noting that India only exports a small amount of steel to the U.S. "How much steel do we actually export to the U.S.?" Poundrik said at an industry event, according to PTI. "We produced 145 million tonnes of steel last year, out of which 95,000 tonnes were exported to the U.S. So, if out of 145 million tonnes, you are not able to export 95,000 tonnes, what difference does it make?"

But not everyone shares this view. Naveen Jindal, president of the Indian Steel Association (ISA), said he was "deeply concerned" that the U.S. restrictions could lead steel manufacturers to dump steel on the Indian market at lower prices. He claimed that the tariffs are "expected to cut steel exports to the US by 85%, resulting in huge surpluses, which may find their way into India, which is one of the few major markets without trade restrictions."

According to the American Iron and Steel Institute, South Korea is a major steel exporter to the U.S. Its steel is used by domestic companies such as Hyundai, Kia, Samsung, and LG, which all have factories in the U.S. and Mexico. South Korean Trade Minister Cheong In-kyo said on Tuesday that South Korea would "actively consider" whether there was room for negotiation with the U.S.—a day after the Ministry of Industry held an emergency meeting with steelmakers. In 2018, when Trump similarly imposed a 25% tariff on all steel imports, Seoul was granted an exemption in exchange for annual import quotas.

It is unclear what kind of agreements might be reached or what kind of exemptions might be granted in the coming month, but Eswar Prasad, an expert on international trade policy at Cornell University, said that in the long run, U.S. trading partners may seek to wean themselves off their dependence on the U.S. by selling their products elsewhere. But he also stated that "Trump's aggressive actions have caught the rest of the world off guard," because the U.S. has a strong economy relative to most of its trading partners. Wendy Cutler, vice president of the Asia Society Policy Institute, said that while U.S. trading partners may seek to appease in the short term, in the long run they may still decide to retaliate. "While there may be gestures of working with the Trump team to avoid tariffs, our partners may conclude that the tariffs are coming so fast and so furiously that negotiation is not a durable option," she said.