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“Economic nationalism leads to war. This is exactly what happened in the 1930s.” This was the response of French President Emmanuel Macron to the protectionist steel and aluminum tariffs recently imposed by the United States (U.S.). American President Donald Trump reasoned that these duties, 25 percent on steel and 10 percent on aluminum, were to prevent the U.S.’s current reliance on imported metals from becoming a national security issue.
The European Union (EU), Canada, and Mexico, three of the U.S.’s biggest trading partners, had initially been exempt from the tariffs, but their immunity expired on June 1, 2018.
In addition to retaliating with tariffs on U.S. imports in their respective economies, the EU, Canada, and others affected have requested dispute consultations from the World Trade Organization (WTO). They claim this duty imposition does not align with the WTO’s General Agreement on Tariffs and Trade and the Agreement on Safeguards.
However, no country is bound to WTO rulings, so the Trump administration will not be forced to oblige by any decisions that are not in the U.S.’s best interests. The U.S. Department of Commerce also grants the president liberty to impose unlimited duties in response to perceived national security threats, but this justification for tariffs has rarely been employed.
Despite concurrent tensions resulting from the steel and aluminum duties, the EU and Japan are banding with the U.S. to push an anti-China reform to the WTO. China has been utilizing unchecked amounts of government subsidies to overproduce aluminum and steel, distorting the markets, and current WTO policies have not been strong enough to regulate this.
Washington, Brussels, and Tokyo also want to tackle development strategy in China that is meant to skyrocket the country’s technology sector, making it a superpower in products such as electric vehicles and artificial intelligence in the long run.
They hope to make enough progress in their agenda to start negotiations in 2019, but first must gather the support of other nations, notably key trade partners like India and Brazil. However, India announced in May that, like the EU, Canada, and Mexico, it would be levying tariffs on goods imported from the U.S. in response to the increased aluminum and steel duties. This marks the first time India has ever imposed retaliatory tariffs on another country.
For different reasons, gaining support from certain other countries to check China’s unfair industrial subsidies may prove to be difficult as well. The three economies heading the agenda make use of significant agricultural subsidies, giving them advantages over smaller agricultural economies, who are likely more concerned with this than the industrial subsidies in question.