European Union slaps retaliatory tariffs on USA as trade war rattles markets

Jeannie Matthews
June 22, 2018

The targets include steel, agricultural and other products, including bourbon, peanut butter, cranberries and orange juice.

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European Union countries retaliatory trade tariffs on a list of U.S. products, agreed in response to USA tariff hikes on steel and aluminium imports from Canada, the EU, and Mexico, will come into force on Friday, the European Commission announced on Wednesday.

When the USA tariffs on steel and aluminum went into effect on June 1, the European Union said they were "illegal", pledged to impose its own tariffs, and filed a case against the U.S.at the World Trade Organization. "He is using his "irrationality" as a tactic and he is trying to confuse us", said Chen Fengying, an economics expert at state-backed China Institutes of Contemporary International Relations. The US has imposed tariffs on Canada, Mexico and £25bn in Chinese goods.

The EU has also filed a case with the World Trade Organisation (WTO), claiming Trump's tariffs were "pure protectionist" and "illegal".

Luxury carmakers Daimler and BMW joined American farmers and Chinese solar panel and steel makers among the first casualties in what looks set to become a bitter trade war on a global scale of a kind not seen since the 1930s.

Beijing has pledged retaliation and Trump has threatened to push harder in response, saying that there could be tariffs on up to $450 billion of imports from China, close to the $500 billion of goods the United States gets from the world's second largest economy.

The new duties have been imposed as tensions over trade continued to grow between the U.S. and China.

"We've never seen anything like this", said Mary Lovely, a Syracuse University economist who studies worldwide trade - at least not since countries tried to wall themselves off from foreign competition during the Great Depression.

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And the highest-stakes fight still looms: In two weeks, the United States is to start taxing $34 billion in Chinese goods.

The U.S. tariffs hit some $7.5 billion of European products; the EU says that today's measures target almost half that figure, and that it plans to impose a slightly larger block of tariffs later - either in three years, or if/when the WTO rules in its favor.

EU countertariffs on a list of USA products would come into force on Friday, the European Commission said Wednesday.

John Murphy, a senior vice president at the US Chamber of Commerce, estimates that $US75 billion in US products will be subject to new foreign tariffs by the end of the first week of July.

As painful as the brewing trade war could prove, many have seen it coming.

Mr Trump ran for the presidency on a vow to topple seven decades of American policy that had favoured ever-freer trade among nations.

The EU also has in reserve potential tariffs of 10% to 50% that it could impose on a further 3.6 billion euros (RM16.6 billion) of USA imports in three years' time.

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