WRAPUP 13-Trump sets steel and aluminum tariffs, Mexico, Canada exempted

* Adds reaction from U.S. lawmakers, EU, industries, details


* Trump concedes some ground on tariffs

* Canada, Mexico reject link to NAFTA talks

* EU believes it should be exempt from tariffs

* Beijing calls trade war a "mistaken prescription"

WASHINGTON, March 8 (Reuters) - U.S. President Donald Trump pressed ahead on Thursday with import tariffs of 25 percent on steel and 10 percent for aluminum but exempted Canada and Mexico and offered the possibility of excluding other allies, backtracking from an earlier "no-exceptions" stance.

Describing the dumping of steel and aluminum in the U.S. market as "an assault on our country," Trump said in a White House announcement that the best outcome would for companies to move their mills and smelters to the United States. He insisted that domestic metals production was vital to national security.

"If you don't want to pay tax, bring your plant to the USA," added Trump, flanked by steel and aluminum workers.

Plans for the tariffs, set to start in 15 days, have stirred opposition from business leaders and prominent members of Trump's own Republican Party, who fear the duties could spark retaliation from other countries and hurt the U.S. economy.

Within minutes of the announcement, U.S. Republican Senator Jeff Flake, a Trump critic, said he would introduce a bill to nullify the tariffs. Republican Orrin Hatch, who chairs the Senate Finance Committee, said he would work with the White House to "mitigate the damage."

But some Democrats praised the move, including Senator Joe Manchin of West Virginia, who said it was "past time to defend our interests, our security and our workers in the global economy and that is exactly what the president is proposing with these tariffs."

Trump's unexpected announcement of the tariffs last week roiled stock markets as it raised the prospect of an escalating global trade war. He appeared to have conceded some ground after a campaign by Republican lawmakers, industry groups and U.S. allies abroad.

Canada, the largest supplier of both steel and aluminum to the United States, welcomed the news it would not immediately be subject to the tariffs, but vowed to keep lobbying Washington until the threat of duties had disappeared.

Trump offered relief from steel and aluminum tariffs to countries that "treat us fairly on trade," a gesture aimed at putting pressure on Canada and Mexico to give ground in separate talks on renegotiating North American Free Trade Agreement.

Mexican Economy Minister Ildefonso Guajardo said NAFTA talks were "independent" of Trump's tariff actions and should not be subject to outside pressure.

Canadian Foreign Minister Chrystia Freeland said Canada considered the two tracks to be totally separate.

U.S. steel stocks, which have gained for weeks on anticipation of the tariffs, fell after the announcement, with the Standard and Poor's composite steel index ending down 2.53 percent against a half percent gain in the broad S&P 500 index.

The Canadian dollar and Mexican peso gained slightly against the U.S. dollar.


A senior Trump administration official said other countries could seek talks with U.S. Trade Representative Robert Lighthizer to find "alternative ways" to mitigate the threat to U.S. national security posed by their steel and aluminum exports to the United States.

It was unclear whether they would involve quotas or voluntary export restraints, but the official said that permanent exemptions for Canada and Mexico might result in higher tariffs on other countries to maintain 80 percent capacity usage targets for domestic producers.

European Union Trade Commissioner Cecilia Malmstrom said: "The EU is a close ally of the U.S. and we continue to be of the view that the EU should be excluded from these measures. I will seek more clarity on this issue in the days to come."

U.S. steel-consuming industries sharply criticized the tariffs as damaging to their prospects.

"The U.S. will become an island of high steel prices that will result in our customers simply sourcing our products from our overseas competitors and importing them into the United States tariff-free," the Precision Metalforming and National Tooling And Machining associations said in a joint statement.


Several major trading partners have said they might respond to the tariffs with direct action.

Countermeasures could include European Union tariffs on U.S. oranges, tobacco and bourbon. Harley-Davidson Inc motorcycles have also been mentioned, targeting Republican U.S. House of Representatives Speaker Paul Ryan's home state of Wisconsin.

Even as Trump threatened tariffs and prodded his NAFTA partners, 11 nations gathered in Chile to sign a landmark Asia-Pacific trade pact, one that Trump withdrew from on his first day in office.

Trump, who won the White House after a career in real estate and reality TV, has long touted an economic nationalism, promising to bring back jobs to the United States and save the country from trade deals he views as unfair. That has put him at odds with many in his Republican Party, traditionally a supporter of free trade.

Beijing, which until now had kept largely silent on the issue, sharpened its rhetoric significantly. One lever that China has is U.S. agricultural exports and it has said in the past that it could target soybeans.

"Especially given today's globalization, choosing a trade war is a mistaken prescription. The outcome will only be harmful," Foreign Minister Wang Yi said on the sidelines of an annual meeting of China's parliament. "China would have to make a justified and necessary response."

China had a record $375.2 billion goods surplus with the United States last year.

Trade tensions between the world's two largest economies have risen since Trump took office last year, and although China accounts for only a small fraction of U.S. steel imports, its massive industrial expansion has helped create a global glut of steel that has driven down prices.

(Additional reporting by Antonio De la Jara and Dave Sherwood in Santiago; Michael Martina, Elias Glenn, Kim Coghill, Brian Love, Nichola Saminather, Doina Chiacu and Andrea Hopkins; Writing by David Stamp, David Chance and David Lawder; Editing by Jonathan Oatis and Peter Cooney)

03/08/2018 19:26

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