The EU last Friday launched its first counteroffensive against Washington’s punishing steel and aluminium tariffs while the US began meetings in Canada with outraged finance ministers from its top trading partners.

Meanwhile in Washington, US President Donald Trump floated the possibility of scrapping the 24-year-old North American Free Trade Agreement in favour of separate bilateral deals with Canada and Mexico.

And in another leg of Trump’s multi-front trade offensive, Commerce Secretary Wilbur Ross arrived in Beijing to continue fraught talks with Chinese officials. Trump has vowed to press ahead with tariffs on as much as $50 billion in imports from China.

Brussels and Ottawa last Friday filed legal challenges at the World Trade Organisation against Washington’s decision. The EU, Canada and Mexico also threatened stiff retaliatory tariffs as they pushed back against Trump’s moves.

Canadian Prime Minister Justin Trudeau said last Friday he was dumbfounded by Washington’s national security basis for the tariffs, given that US and Canadian troops had fought together in World War II, Afghanistan and elsewhere.

“This is insulting to them,” he told NBC News.

British Prime Minister Theresa May said she was “deeply disappointed” and reiterated a call for Britain and the EU to be “permanently exempted” from the “unjustified” metals tariffs.

At the Group of Seven ministerial meeting in Canada, US Treasury Secretary Steven Mnuchin faced stern reactions from his counterparts, who accused Trump of jeopardising the world economy with steps that would prove job killers for all concerned.

Trump and the ‘G6’

“The French, British and Germans held firm,” French Finance Minister Bruno Le Maire told reporters.

“Everyone expressed their complete incomprehension of the American decisions and everyone said it was up to the Americans to take the next step since they were the ones who imposed the tariffs.” Le Maire had earlier last Friday referred to the talks as a “G6 plus one,” with the United States standing apart, adopting a joke circulating among attendees at the weekend.

Talk of trade did not completely drown out the meeting’s agenda, which included tax evasion and crypto-currencies, but the meeting’s chair, Canada’s Finance Minister Bill Morneau, allowed participants to register grievances with Mnuchin one at a time, according to a Canadian source.

At the Group of Seven ministerial meeting in Canada, US Treasury Secretary Steven Mnuchin faced stern reactions from his counterparts, who accused Trump of jeopardising the world economy with steps that would prove job killers for all concerned

German Finance Minister Olaf Scholz told reporters he had let Mnuchin know the tariffs were “unacceptable.” The US imposed the tariffs in March, but gave Canada and the EU, the biggest sources of foreign aluminium and steel for the US, grace period that ended at the week before on Thursday.

Trump’s decision had already drawn furious responses from Canada’s Trudeau, German Chancellor Angela Merkel and French President Emmanuel Macron.

The EU is preparing to slap tariffs on US products including bourbon, motorcycles and blue jeans worth up to $3.3bn.

“If players in the world don’t stick to the rule book, the system might collapse. That is why we are challenging the US and China at the WTO,” EU Trade Commissioner Cecilia Malmstrom said.

Macron told Trump in a telephone call that the tariffs were “illegal,” and Merkel said the measure “risks touching off spirals of escalation that in the end hurt everyone.” Canada unveiled a package of counter-tariffs on US imports valued at $12.8bn.

And Mexico said it would impose retaliatory duties on a variety of US goods, including steel and a host of agricultural goods such as pork, apples and cheese.

‘Incomprehensible’

The prospect of a global trade war has roiled financial markets this week even if they were back in positive territory on the last working day of the week due to upbeat US economic data.

Berenberg Bank economist Holger Schmieding argued that the direct impact of a US-EU trade war on the world economy would actually be rather small.

Nevertheless, “Trump’s contempt for international rules can deal a significant blow to business confidence, especially in trade-oriented nations,” Schmieding said.

The WTO’s former chief, Pascal Lamy, also said the damage would likely be limited in concrete terms.

“We have to keep things in proportion,” he said on the French radio station France Info. He estimated that the economic impact of the tariffs would amount to “a very small part of trade flows as a whole.”

But others have estimated the impact as up to a full point off global growth if the conflict expands and retaliation goes into effect.

The German carmakers’ federation described the imposition of tariffs as “incomprehensible.” “In a connected, global economy, customs barriers don’t benefit anyone, including the United States,” the VDA federation said.

Germany’s carmakers are especially braced for the latest threat from Trump, who earlier this month launched proceedings that could eventually slap 25 percent tariffs on auto imports.

“I know he has a very particular problem with German cars,” warned Malmstrom.

Alex Pigman contributed from Brussels

Published in Dawn, The Business and Finance Weekly, June 4th, 2018