'Carve-outs' for US friends to soften steel blow

The White House says Mexico, Canada and other countries may be spared from US President Donald Trump's planned steel and aluminum tariffs under national security "carve-outs" - a move that could soften the blow amid threats of retaliation by trading partners and dire economic warnings from lawmakers and business groups.



Friday, March 09, 2018

The White House says Mexico, Canada and other countries may be spared from US President Donald Trump's planned steel and aluminum tariffs under national security "carve-outs" - a move that could soften the blow amid threats of retaliation by trading partners and dire economic warnings from lawmakers and business groups.

Trump pledged yesterday the United States would show "flexibility" to "real friends" ahead of an expected signing ceremony to formalize the controversial measures this morning, Hong Kong time.

"We have to protect and build our steel and aluminum industries while at the same time showing great flexibility and cooperation toward those that are real friends and treat us fairly on both trade and the military," he tweeted.

Press Secretary Sarah Huckabee Sanders said the exemptions would be made on a "case by case" and "country by country" basis, a reversal from the policy articulated by the White House just days ago that there would be no exemptions from Trump's plan.

The update came as congressional Republicans and business groups braced for the impact of expected tariffs of 25 percent on imported steel and 10 percent on aluminum, appearing resigned to additional protectionist trade actions as Trump signaled upcoming economic battles with China.

The looming departure of White House economic adviser Gary Cohn, who has opposed the tariffs, set off anxiety among business leaders and investors worried about a potential trade war.

"We urge you to reconsider the idea of broad tariffs to avoid unintended negative consequences to the US economy and its workers," 107 House Republicans wrote in a letter to Trump.

At the White House, officials were working to include language in the tariffs that would give Trump the flexibility to approve exemptions.

"He's already indicated a degree of flexibility, I think a very sensible, very balanced degree of flexibility," Commerce Secretary Wilbur Ross said. "We're not trying to blow up the world."

Trump signaled other trade actions could be in the works. In a tweet, he said the "US is acting swiftly on intellectual property theft."

A White House official said Trump was referencing a China probe in which the US trade representative is studying whether Chinese intellectual property rules are "unreasonable or discriminatory" to US business.

The official said an announcement on the findings - and possible retaliatory actions - was expected within the next three weeks.

China - which maintained a robust trade surplus with the United States - issued a stern message to Trump.

"Choosing a trade war is surely the wrong prescription, in the end you will only hurt others and yourself," Foreign Minister Wang Yi said. "China will certainly make an appropriate and necessary response."

US business leaders, meanwhile, continued to sound the alarm about the potential economic fallout from tariffs, with the president of the US Chamber of Commerce raising the specter of a global trade war.

That scenario, Tom Donohue said, would endanger the economic momentum from the GOP tax cuts and Trump's rollback of regulations. "We urge the administration to take this risk seriously," Donohue said.

Lawmakers opposed to the tariffs, including House Speaker Paul Ryan and Senate Majority Leader Mitch McConnell, have suggested more narrowly focused approaches to target Chinese imports.

Republicans in Congress have lobbied administration officials to reconsider the plan and focus the trade actions on China, warning that allies such as Canada and members of the European Union would retaliate.

The EU said it was prepared to respond to any tariffs with counter-measures on everything from steel to peanut butter, orange juice, cranberries, bourbon and denim jeans.

"Trade wars are bad and easy to lose," EU president Donald Tusk said, directly rebuffing Trump's assertion last week that they were "good and easy to win."

The EU also warned Trump against letting individual states like Britain off tariffs, saying any such exemption would be viewed as applying to the whole bloc.

"They are probably considering some exemptions to [North American Free Trade Agreement] countries ... but also they have mentioned the UK," European Commission Vice President Jyrki Katainen said.

"So if they try to make an exemption for one of our member states it means the EU as a whole."

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