The Aluminium War

In March, the US president announced its intent to impose tariffs on imports of steel and aluminium to the US (at rates of 25% and 10%, respectively) with possibility for allies to be excluded from the scope of such measures. Since the announcement, the EU was negotiated with the US and the effective date of the tariff increase was deferred many times until the 1st of June.

The EU and the American Chamber of Commerce to the EU do not understand the purpose of these measures

These measures are primarily intended to protect the US domestic industry from import competition. This reason is rejected by both the European Commission and the American Chamber of Commerce to the EU.

The European Commission said:

« Any national security justification appears very weak: the US Secretary of Defence has stated publicly that US military requirements represent no more than 3% of US production and that the Department of Defence is able to acquire the steel and aluminium it needs for US national defence requirements. »

Susan Danger, CEO, American Chamber of Commerce to the EU (AmCham EU), provided the following comments:

« American companies in Europe oppose the US government’s decision to impose tariffs on EU imports of steel and aluminium. We urge the US government to revisit its plans and the EU to take a balanced approach in responding to these measures. We are very concerned by the damage a tit-for-tat dispute would cause to the transatlantic economy and its impact on jobs, investment and security across the Atlantic.
We continue to believe that the EU meets all the criteria set out for a permanent exemption. The EU does not pose a national security threat to the US and therefore should not be the target of such measures.
This move puts the global trading system at risk. We hope both parties can work together to reduce tensions immediately. The EU and the US should cooperate to solve the core issue of global overcapacity. In addition, they should collaborate to address third countries’ unfair trading practices and to improve the functioning of the World Trade Organization (WTO). »

What would be the European countermeasures?

On 6th June, the College of Commissioners endorsed the decision to impose additional duties on the full list of US products[1] notified to the WTO, as part of the EU’s response to the US tariffs on steel and aluminium products. The European Commission expects to conclude the relevant procedure in coordination with Member States before the end of June so that the new duties start applying in July.

Trade Commissioner Cecilia Malmström said the counterbalancing measure represented a “measured and proportionate response to the unilateral and illegal decision” by US President Donald Trump

Another consequence of the US decision is that the Europe’s offer to discuss a trade deal on industrial goods, made before Washington imposed the duties, is now off the table.

Potential impacts on defence procurement

Aluminium is widely used in making various ammunition components, parts for missiles and missile batteries, tanks, and components used in spaceships and satellites. Defence procurement programs are therefore heavily dependent on the price of steel.

CBC Canada[2] published an interesting article on the consequences for the Canadian market saying that Canada orders normally US equipment discouraging EU enterprises to compete in procurements:

« As recently as three years ago, Europe’s fighter jet manufacturers — Airbus, Saab and Dassault — were privately and quietly weighing whether it was worth it for them to bid on Canada’s full CF-18 replacement given the former Conservative government’s fondness for the F-35 and the Liberal government’s courting of Boeing for interim Super Hornets. Now, some of those European manufacturers are saying privately that it’s a whole new ball game in Canada. »

Reuters[3] recalls that tariffs have led to higher steel and aluminium prices in the United States benefiting producers but potentially squeezing profit margins of large companies that use the metals. For Boeing, a 10 percent aluminium tariff would increase the cost of manufacturing some planes by about 1.2 percent if all of the aluminium is imported. But most of the aluminium Boeing uses is domestically produced. Boeing is now communicating that the US decision will not affect the prices: the tariffs would not result in an automatic price increase since “Boeing relies on U.S. suppliers for approximately ninety per cent of our end-use aluminum« .

Photo credit : ©Pixabay – Donald Trump

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