The United States signaled it will slap several countries with tariffs as a way to retaliate for economic policies implemented by these nations that could prove detrimental to the US.
Response to Brazil’s, Argentina’s Currency Devaluation
President Donald Trump announced last week that he will raise tariffs on steel and aluminum imports from Brazil and Argentina, a surprise move that spooked the financial markets. Trump said it is in response to the move of two of the largest economies in South America to devalue their currencies and hurt American farmers in the process — as weaker currencies would in effect make goods from Brazil and Argentina cheaper in the international market compared to US farm goods.
…..Reserve should likewise act so that countries, of which there are many, no longer take advantage of our strong dollar by further devaluing their currencies. This makes it very hard for our manufactures & farmers to fairly export their goods. Lower Rates & Loosen – Fed!
— Donald J. Trump (@realDonaldTrump) December 2, 2019
“Brazil and Argentina have been presiding over a massive devaluation of their currencies, which is not good for our farmers. Therefore, effective immediately, I will restore the Tariffs on all Steel & Aluminum that is shipped into the U.S. from those countries,” Trump said in his tweet.
Brazil and Argentina became alternative soybeans suppliers to China following the escalating US-China trade war. They have also been exporting other agricultural products to the Communist country, effectively grabbing the market share away from American farmers.
Trump said he would drop Brazil and Argentina’s exemption from the 25% steel tariffs and 10% aluminum tariffs placed on foreign steel and aluminum exports to the US, which he announced in March 2018.
Brazil’s president, Jair Bolsonaro, already said he would call the US president to ask him not to punish the country. Meanwhile, Argentina Production Minister Dante Sica also reportedly stated that the country is seeking to negotiate with the US to resolve the issue.
“I don’t see this as retaliation. I’m going to call him so that he doesn’t penalize us … and I’m almost certain he’ll listen to us,” the Brazillian president, a self-proclaimed Trump fan, recently told Radio Itatiaia.
Retaliating Against France’ New Digital Services Tax
The Trump government is also proposing new tariffs of up to 100% against France’ $2.4 billion exports to the US, to punish the European nation for implementing a new digital-services tax that is hitting American tech companies hard.
The new US tariff would be applied to imports of French wine, luxury handbags, cheeses, and make-up products.
“The USTR is focused on countering the growing protectionism of EU member states, which unfairly targets US companies,” US Trade Representative Robert Lighthizer said.
“The decision sends a clear signal that the United States will take action against digital tax regimes that discriminate or otherwise impose undue burdens on US companies,” he added.
France decided in July to implement a 3% tariff on revenue from digital services earned in France by firms with more than 25 million euros in French revenue and 750 million euros ($845 million) worldwide. This is expected to hit US tech companies including Google, Facebook, Apple, and Amazon.
Republican senators have said that the French digital services tax is “unreasonable, protectionist, and discriminatory.”
In response to the US government’s plan, France recently signaled it is ready to challenge Trump’s plan to the World Trade Organization (WTO), saying the national tax on digital companies “touches US companies in the same way as EU or French companies or Chinese.”
“It is not discriminatory,” French Finance Minister Bruno Le Maire reportedly said.
Increasing Tariff on EU as WTO Sides with US on Airbus Subsidies
The United States also announced it might increase retaliatory tariffs on European goods following the WTO’s decision last week to reject the EU’s claims that it no longer provides subsidies to planemaker Airbus.
Last October, the WTO awarded the US the right to impose $7.5 billion in annual tariffs on the European Union for providing subsidies to Airbus, which negatively affected the American planemaker Boeing. Back then, the US levied a 10% tariff on Airbus planes, and 25% on other European farm products like cheese, olives, and whisky.
WTO’s most recent ruling rejected EU claims that the European planemaker’s move to stop producing the A380 meant it is no longer hurting Boeing. The WTO, however, ruled that the A380 would still cause market-share damage to Boeing as the company continues to produce and deliver the aircraft. Airbus said it will shut down the production of the A380 by 2021.
The USTR, following the favorable WTO ruling, said it would look at raising tariff rates and levying duties to more European products — although details on the amount and list of products to be included were not immediately made available.
No Rush to Strike Trade Deal with China
Meanwhile, the US also sounded off that it is in “no rush” to sign a trade deal with China, just for the sake of ending an ongoing trade war that has dragged on for over a year.
Secretary of Agriculture Sonny Perdue said America “will not just sign a deal to have a deal” despite criticisms that the trade tension is hitting American farmers hard.
“He obviously has an affection and affinity for farmers, but he’s also going to reset this trade relationship with China. We’ve been in an economic war with China for 20 years,” Perdue said, explaining that the US “just didn’t recognize it.”
“The President has called it out, is going to reset that arrangement. And I think the talks are going well irrespective of what you hear, but we have to be very careful. The deal with China is we’ve got to be assured that they’re going, it’s going to be enforceable. They’re going to really comply and do what they say. We’re not just going to sign a deal to have a deal,” he added.
The Wall Street Journal has it wrong, we are under no pressure to make a deal with China, they are under pressure to make a deal with us. Our markets are surging, theirs are collapsing. We will soon be taking in Billions in Tariffs & making products at home. If we meet, we meet?
— Donald J. Trump (@realDonaldTrump) September 13, 2018
The US has accused China, among others, of stealing technology by forcing foreign companies to transfer IP to local Chinese firms. They have also pointed out trade imbalance which allows China to take advantage of America while hurting US exporters who export elsewhere. Finally, the US considers China an unfair trade player — favoring state-owned firms over foreign firms that enter the Chinese market.
In order to produce and sell, foreign firms are required to onboard a local partner. They are required to transfer their technology to the local company, which Trump has argued facilitates Chinese firms to access sensitive data that could endanger national security.