Rolling back free trade?

Rolling back free trade?

Context:

• At the World Economic Forum in Davos, announcement of steep metal tariffs leaves no one in doubt about the meaning of U.S. President Donald Trump’s “America first” agenda.

Announcements:

• A 25% duty on steel and 10% on aluminum imports for an unspecified period.
• These blanket tariffs are the most comprehensive of the recommendations by the U.S. Commerce Department, compared to the targeted levies and quotas against specific countries that were overruled by an instinctively protectionist President.

Justifying the measures:

• The administration has invoked a national security law, departing from an international consensus not to impose trade barriers.
• Countries are allowed recourse to that means under the General Agreement on Tariffs and Trade in times of war and other emergencies.
• However, Trump did not heed suggestions that the national security argument should exempt member states of the North Atlantic Treaty Organisation.

Concern for EU:

• A concern for the European Union would be to deal with the fallout from the U.S. levy on the bloc’s bloated steel industry.
• The current escalation could be defused depend on the chances that countries can negotiate their way out of the tariffs, and corporations can win exemptions for their products.

Effect on US:

• The latest levy is expected to put at risk millions of manufacturing jobs that rely on these metals.
• It is unlikely to create significant new employment in these two sectors given that current U.S. steel and aluminum production remain close to a 10-year average.
• The hefty tariffs could undermine recent tax initiatives to lure investment.

Conclusion:

Seeking to roll back the U.S. liberal trade regime is hardly the way to influence other economies to open their markets. Instead, Brussels would have to show leadership to defend the current open trading system. Experts have opined that the spike may have contributed to Washington’s 2017 trade deficit, which widened to its highest level since the global financial crisis.