The International Monetary Fund (IMF) said US president Donald Trump’s proposals to heavily tax steel and aluminium imports could damage the US economy, as fears of a trade war between the US and its key partners escalated with the European Union threatening to impose retaliatory tariffs on the US.
Despite opposition from within his administration, Mr Trump on Thursday announced tariffs of 25 per cent on steel and 10 per cent on aluminium imports.
“The import restrictions announced by the US President are likely to cause damage not only outside the US, but also to the US economy itself, including to its manufacturing and construction sectors, which are major users of aluminium and steel,” the IMF’s spokesperson Gerry Rice said in a statement on Friday night.
“We are concerned the measures proposed by the US will, de facto, expand the circumstances where countries use the national-security rationale to justify broad-based import restrictions.”
President Trump warned of more trade actions in the form of ‘reciprocal taxes’, the term he has used for imposing levies on imports from countries that charge higher tariffs on US goods that what the US charges them.
“Trade wars are good and easy to win,” he tweeted on Friday. "We must protect our country and our workers. Our steel industry is in bad shape. If you don't have steel, you don't have a country!"
Mr Trump’s aggressive proposal has sparked global outrage and fears that key US trading partners such as China and Europe will retaliate.
EU officials said earlier they would respond “firmly” if Mr Trump presses ahead with his plan for steep tariffs on metals, potentially by imposing 25 per cent tariffs on around $3.5 billion of imports from the US, Reuters reported.
“We will not sit idly while our industry is hit with unfair measures that put thousands of European jobs at risk,” European Commission head Jean-Claude Juncker said.
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Trade wars are 'easy to win', says Donald Trump as he lays down gauntlet to metal industries
China says it may hit back at proposed US tariffs on imported steel, aluminium
Donald Trump announces steep steel and aluminium tariffs
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“A trade war is in no one’s interests,” added the World Trade Organization director-general Roberto Azevedo on Friday, while Li Xinchuang, the vice-chairman of China Iron and Steel Association, called it “an extremely stupid move”.
The introduction of new tariffs by the US is a "misguided" move, Uday Patel, senior research manager - aluminium markets, at research firm Wood Mackenzie told The National.
“What this action ultimately [would do] is hurt the US more than they realise, because automatically it increases the price of aluminium, it’s going to be inflationary,” he said.
“What you get is inflationary pressures at a time when the US Federal Reserve is already thinking about increasing interest rates. This will impact growth.
“If you look at the number of smelters in the US that could start production because of higher prices of aluminium, you might create at a generous best 7000 jobs, but you risk losing hundreds of thousands of jobs.”
Sellers of aluminium in the US could see their margins shrink by around 10 per cent, Mr Patel said.
“Trump has not said you could only import so much aluminium to the US, so [as a seller] if your landed cost - that is LME [London Metal Exchange] plus the US premium and transport costs - say they come to around $2,000, then add $200 in duties, it will simply mean 10 per cent less margin for the seller in the US.”
GCC producers have yet to respond publicly to Mr Trump’s proposals.
The region accounts for around 20 per cent of global aluminium production, with UAE government-owned Emirates Global Aluminium (EGA) reporting record production levels of 2.1 million tonnes in 2017 and supplying to over 60 countries worldwide. Aluminium Bahrain (Alba) meanwhile is working to build the world’s largest aluminium smelter by 2019.
EGA and Emirates Steel declined to comment on Mr Trump's proposals when approached by The National.
Saudi Arabia Mining Company’s Maaden Aluminium signed preliminary agreements with its US joint venture partners Alcoa and Mosaic last May for a possible expansion of its aluminium production complex in Ras Al Khair Industrial City, a project that would raise primary aluminium capacity by 600,000 metric tonnes per year.
Oman’s Sohar Aluminium – a $2.4bn joint venture controlled by Oman Oil Company and Abu Dhabi National Energy Company, which each hold 40 percent, and Alcan, a unit of Anglo-Australian mining giant Rio Tinto, which owns 20 percent – has an annual production capacity of 375,000 tonnes.
Any GCC impact of a US-imposed steel tariff would likely be slim because the Middle East does not export significant volumes of steel to the US, according to experts.
“[Steel] accounted for in the order of 0.9 per cent of total Middle Eastern exports last year, so the direct implications for Middle Eastern producers would be relatively small,” said Valentina Burrai, senior research manager, steel & iron ore markets at research firm Wood Mackenzie.