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China can shrug off US' steel and aluminium tariffs, for now

China can shrug off US' steel and aluminium tariffs, for now

The Globe and Mail reported Tuesday that Ottawa is looking at imposing its own tariffs on steel and aluminum imports from China.

Given Trump's lack of focus on tariffs, the European Union is considering countering them with tariffs that have a political bias - products made in Republican "red states" such as Kentucky bourbon (home of Senate Majority Leader Mitch McConnell), Harley-Davidson motorcycles from Wisconsin (home of House Speaker Paul Ryan) and agricultural products. U.S. Steel and Century Aluminum are already ramping up, bringing back hundreds of workers. So the idea of acting tough to get a better deal in a number of areas where President Trump feels the USA has gotten a bad deal seems to have something of a ring of truth in it.

So Trump's metals tariffs look likely to be a self-inflicted wound for the U.S. - even if they don't spark retaliation from trading partners, and even if they don't weaken American alliances.

The tariffs will affect a wide range of products, including high-tech gadgets, food, furniture and beverages.

According to the Politico media outlet, the tariffs package was presented by US Trade Representative Robert Lighthizer as a response to alleged intellectual property theft by China.

"Imported aluminum used to make beer cans is not a threat to national security", said Jim McGreevy, the Beer Institute's CEO.

"A tariff is a tax, plain and simple", said Matthew Shay, president and CEO of the NRF.

Housing trade groups also took a dim view of the tariffs, saying the policy would raise costs and slow building at a time when the nation faces a severe shortage in homes and rental housing.

After a huge construction boom at the start of the millennium boosted its steel industry, China's recent economic downturn prompted it to export its overcapacity in steel at artificially low prices.

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Tariff bashers claim that the US could rely on these foreign suppliers in war.

"If this is serious, the Chinese will retaliate". The EU could then also challenge the USA action in the WTO with the hope and expectation of winning as in 2003. Our worldwide trade deals are outdated and in need of renegotiation. Trump said the number needed to be bigger, and an announcement on the move could be expected in the coming weeks. China now runs a $375 billion trade surplus with the US and Trump asked President Xi Xinping's economic advisers how to reduce this disparity during Xinping's recent visit. The imbalances and inequities generated by the global economy can not be tackled by protecting a few politically well-connected industries.

The United States, joined by Europe, has been the anchor of the global free trade system, ever since the end of the Second World War.

The tariffs, reportedly targeting Chinese tech, electronics and telecoms, were revealed by sources hours after Trump abruptly fired Secretary of State Rex Tillerson.

"Industries that would be helped by a reduction in imports from China include steel, aluminum, telecommunications equipment, furniture and textiles".

The U.S. tariffs could push producers to sell still more to Southeast Asia, depressing steel prices. But WTO cases take time and during this time the U.S. steel industry could have some temporary relief.

It's an argument that makes sense at some level, but it also obscures a broader truth about military spending in the global economy: Supply chains have become so complex that it would be virtually impossible for the USA military to go it alone. However, head of investment at interactive investor Rebecca O'Keeffe said global equity markets are "fragile" and "investors are wary as the increasing rhetoric... on tariffs and a potential escalation of a full-blown trade war make it possible that things could get very ugly, very quickly".

A trade war isn't going to level that field.