EU pledges retaliation after Trump’s metal tariffs come into effect

01 Jun 2018 --- US President Donald Trump’s10 percent and 25 percent tariffs on aluminum and steel imports respectively have come into effect today. Just minutes after the imposition was confirmed, the EU pledged to implement retaliatory tariffs and seek a settlement dispute at the World Trade Organization (WTO).

Aluminum and steel packaging suppliers will be monitoring developments closely and preparing for the possible effects the tariffs could have on the price of virgin materials and the viability of the global supply chain.

The Beer Institute has estimated that over half the beer produced in the US is packaged in aluminum cans or bottles and that the 10 percent tariff could hit the US beverage industry with an additional US$347.7 million in tax.

Molson Coors – one of the world’s largest brewers by volume – has vocalized concerns about potential job losses and price rises. In a statement, the company said, “There simply isn't enough supply to satisfy the demands of American beverage makers.”

“Like most brewers, we are selling an increasing amount of our beers in aluminum cans and this action will cause aluminum prices to rise and is likely to lead to job losses across the beer industry."

There is also widespread disharmony among US aluminum producers. 114 producers – including Alcoa, Vulcan and Rio Tinto Alcan, who have a combined workforce of over 700,000 – grouped to share their concerns with President Trump in a letter dated March 6, 2018, referring to the tariff plans as ”deeply concerning.”

Global packaging suppliers understandably have strategies in place to mitigate the risk of fluctuating raw aluminum availability and costs. “The way we manage our supply chain means disruptions that can adversely affect the price and sales volumes, and result in unexpected costs, are minimized,” Melinda de Boer of Amcor tells FoodIngredientsFirst. 

President of the European Commission, Jean-Claude Juncker says: “I am concerned by this decision. The EU believes these unilateral US tariffs are unjustified and at odds with WTO rules. This is protectionism, pure and simple. Over the past months, we have continuously engaged with the US at all possible levels to address the problem of overcapacity in the steel sector jointly.”

“Overcapacity remains at the heart of the problem and the EU is not the source of but on the contrary equally hurt by it. That is why we are determined to work towards structural solutions together with our partners. We have also consistently indicated our openness to discussing ways to improve bilateral trade relations with the US but have made it clear that the EU will not negotiate under threat,” he adds.

“By targeting those who are not responsible for overcapacities, the US is playing into the hands of those who are responsible for the problem. The US now leaves us with no choice but to proceed with a WTO dispute settlement case and with the imposition of additional duties on a number of imports from the US. We will defend the Union's interests, in full compliance with international trade law," Juncker concludes.

Commissioner for Trade Cecilia Malmström states: "Today is a bad day for world trade. We did everything to avoid this outcome. Over the last couple of months, I have spoken on numerous occasions with the US Secretary of Commerce. I have argued for the EU and the US to engage in a positive transatlantic trade agenda, and for the EU to be fully, permanently and unconditionally exempted from these tariffs.”

“This is also what EU leaders have asked for. Throughout these talks, the US has sought to use the threat of trade restrictions as leverage to obtain concessions from the EU. This is not the way we do business, and certainly not between longstanding partners, friends and allies,” she says.

“Now that we have clarity, the EU's response will be proportionate and under WTO rules. We will now trigger a dispute settlement case at the WTO since these measures go against agreed international rules. We will also impose rebalancing measures and take any necessary steps to protect the EU market from trade diversion caused by these US restrictions,” Malmström adds.

The US measures affect EU exports worth €6.4 billion (US$7.5 billion) in 2017. The EU will launch legal proceedings against the US in the WTO today (June 1). The College of Commissioners decided this on May 29 and Member States were consulted on the same day. The US measures are primarily intended to protect the US domestic industry from import competition, which the EU considers to be at odds with WTO rules.

As regards the US tariff measures, the EU will use the possibility under WTO rules to rebalance the situation by targeting a list of US products with additional duties. The level of tariffs to be applied will reflect the damage caused by the new US trade restrictions on EU products. The list of US products is ready: it was consulted with European stakeholders and supported by Member States. The EU notified its potential rebalancing to the WTO on May 18 and, in line with the Organization rules, could trigger them 30 days later. The Commission will now in coordination with Member States take a formal decision to proceed with the rebalancing.

The Commission is determined to shield the EU steel and aluminum markets from damage caused by additional imports that might be coming into the EU as a result of the closure of the US market. An investigation towards the possible imposition of safeguard measures on steel was launched on March 26. The Commission has nine months to decide whether safeguard measures would be necessary. This decision could also be taken much earlier in the proceedings if the investigation confirms the necessity for swift action. The Commission has also put in place a surveillance system for imports of aluminum to be prepared in case action will be required in that sector. 

How may the EU and Canada retaliate? What are likely targets for EU action?
Today (June 1), the EU made public its full 10-page list of US products that could be targeted for retaliation unless the Trump administration backs down and exempts the allied member states from the new tariffs on steel and aluminum imports. 

Here is the list in full. 

Included are various sweetcorn categories, including frozen, kidney beans, maize (except seeds for sowing), some categories of semi-milled rice, peanut butter, cranberries and orange juice as well as bourbon whiskey in certain measurements and containers. 

These counter-tariffs, if they come into force, could play a vital role in a growing trade battle between the US and its allies, including the EU and Canada, which buys half of US steel exports.

Speaking yesterday, Canadian Prime Minister Justin Trudeau strongly objected and criticized Trump’s tariffs and says his country is now planning “trade-restrictive countermeasures” which could affect US$12.8 billion of US goods. 

Canada could begin its own 10 percent tariffs on a wide variety of items which include yogurts, soy sauce, strawberry jam, pizza, quiche, orange juice, whiskey, soup, coffee, water and mixed condiments. The plans also cover other self-care and cosmetic items like shaving foams, toilet paper, hair lacquers and products for manicures and pedicures. 

The reasoning behind the selected items on both the EU and Canada lists is unclear at this time. 

“These countermeasures will only apply to goods originating from the US,” says a statement from Canada’s Department of Finance.

“These countermeasures will take effect on July 1, 2018, and will remain in place until the US eliminates its trade-restrictive measures against Canada. The countermeasures will not apply to US goods that are in transit to Canada on the day on which these countermeasures come into force.”

See Canada’s list here.

By Joshua Poole & Gaynor Selby