Donald Trump says “trade wars are good” after steel and aluminium tariffs prompt global market sell-off
Donald Trump has doubled down on his decision to impose tariffs on steel and aluminium imports to the US, tweeting “trade wars are good”.
The US President tweeted: “When a country (USA) is losing many billions of dollars on trade with virtually every country it does business with, trade wars are good, and easy to win. Example, when we are down $100 billion with a certain country and they get cute, don’t trade anymore-we win big. It’s easy!”
His comments come after global markets reeled from his decision, unveiled late last night, to impose a 25 per cent levy on steel imports and 10 per cent on aluminium products.
The new tariffs will come into force next week.
The FTSE100 opened down and continued to fall more than 0.5 per cent after the controversial move, which had already knocked two per cent off the Dow Jones overnight. By mid-afternoon the blue chip market was down 1.2 per cent, taking the index to the the lowest level since December 2016.
The contagion spread across the markets into Europe. Germany’s Dax reached a six month low, having fallen 1.6 per cent, while France’s Cac dropped 1.3 per cent.
Meanwhile in Asia, Japan’s Nikkei 225 closed the day down 2.5 per cent, with steel stocks JFE Holdings and Kobe Steel dropped 2.6 and 2.7 per cent respectively. Car makers also suffered, with Honda Motor and Toyota Motor down 3.8 per cent and 2.4 per cent. It is designed to tackle “unfair trade” according to Trump.
When a country (USA) is losing many billions of dollars on trade with virtually every country it does business with, trade wars are good, and easy to win. Example, when we are down $100 billion with a certain country and they get cute, don’t trade anymore-we win big. It’s easy!— Donald J. Trump (@realDonaldTrump) March 2, 2018
Last night Trump said the measures were designed to tackle “unfair trade”.
“We need great steel makers, great aluminium makers for defence,” he said.
Trump’s move – which had been fiercely fought by senior figures within the UK government over fears of the impact it would have on the country’s struggling steel industry – comes just before Theresa May sets out her vision for a strong future based on a historic free trade agreement with the EU and other countries.
However the US’ shift towards more protectionist measures could scupper those plans before they have even started.
Trade association UK Steel has slammed the move as seriously undermining the industry.
Trump’s measures “smack of short-termism, protectionism and would be rife with unintended consequences for global trade and for the users of steel in the US,” said head of policy Richard Warren.
Analysts were similarly unimpressed.
Robert Carnell of ING said: “The world stands on the brink of a trade war as Donald Trump announces severe tariffs on steel and aluminium… this is how recessions start.
“Trade is just about the only thing economists are agreed on – more is better.”
Adam Cole of Royal Bank of Canada added: “Many of the US’s main trading partners have said they will respond with reciprocal action. Generally, restrictions on world trade would be less negative for relatively closed economies, like the US, and hence positive for USD. But the risk of a bilateral trade war with China makes the current situation different, given China’s large holdings of USTs.”