Trump's trade war hangs over neighbours at Nafta summit

Erika Holt
March 12, 2018

Canada is America's biggest steel supplier with most of the product shipped south coming from Ontario. Six months of talks to redraft the North American Free Trade Agreement have so far come to nothing despite frequent tweets that Trump would pull the trigger on the deal with Canada and Mexico that the president has dubbed a jobs killer. Democrats hope to take back control of the House and Senate in November, while Republicans planned to run on an economic argument to defend their majorities.

Late last week, Trump declared he would soon levy punitive steel and aluminum tariffs - 25 and 10 per cent respectively - against the rest of the world in a bid to protect American steel and aluminum producers from unfair competition.

Believe it or not, the White House has traditionally been the pro-trade wing of the federal government.

"These tariffs right now are just talk, but they have the potential to become quite inflammatory and impact economic growth", Kristina Hooper, chief global market strategist at Invesco, told Bloomberg Television.

The recent announcements by the U.S. government regarding trade deals and worldwide relations have sparked an imminent threat of a trade war, one that could be devastating for the global economy in unthinkable ways.

White House press secretary Sarah Huckabee Sanders said on Monday that Mr Trump was "very confident" the USA would win any trade war. "I don't think we have to escalate this into a full-blown trade war".

"No, we're not backing down", Trump said in the Oval Office, seated with visiting Israeli Prime Minister Benjamin Netanyahu.

Although China is the second largest aluminum exporter to United States, it accounts for less than 10 percent of USA aluminum imports, trailing far behind Canada's 41 percent share. Calling it as a "great thing for the American worker", he signed an executive order that resulted in the United States ending its part in the major 12-nation trade deal.

Prospects of a global trade war hit financial markets hard last week, although by Monday, stock markets had recovered their poise.

But the move may harm USA auto, airline, construction, manufacturing and other sectors by raising their costs, threatening the jobs of hundreds of thousands of workers in these sectors.

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And more than five jobs would be lost for every one gained under the tariffs, according to the Washington, D.C. -based economic consulting firm.

Trump has threatened a fine in dollars of "numbers that you hadn't even thought about" for China over the issue in a Reuters interview earlier this year, although the parameters of the investigation have not been disclosed and no date has been set for a decision.

China has been largely mum, urging caution, and both Canada and Mexico have stressed the targeted nature of any response.

A spokeswoman for Paul Ryan said the House Speaker was "extremely worried" about the proposed tariffs and urged the White House "to not advance with this plan".

Stresses inside the White House?

At the same time, Democrats have also expressed skepticism about the benefits of trade agreements, including the North American Free Trade Agreement.

"We're working on NAFTA, if we're able to make a deal with Canada and Mexico on NAFTA, there will be no reason to do tariffs with Canada and Mexico", he said.

Trump has yet to formally announce the proposed tariffs. The exact timing was unclear as the tariff documentation had to be drafted and go through a variety of reviews, a process that takes days, an administration official said.

"China wins when we fight with Europe", he said on CBS's "Face the Nation". Transatlantic trade in metals is very small, according to Capital Economics, which calculates that exports of "basic metals" to the United States account for less than 0.1 per cent of the euro zone economy.

For now, the U.S. President seems to be ignoring this irony.

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