Dow sinks on Trump's steel, aluminum tariffs

Dow sinks on Trump's steel, aluminum tariffs

U.S. Presidential nomineeDonald Trump walks past a Mexican flag after giving a press conference with Mexico's President Enrique Pena Nieto at the Los Pinos residence in Mexico City, Mexico, August 31, 2016.

The United States has fired the opening shots in a trade war with three of its traditional allies after imposing tariffs on imported steel and aluminium from the European Union, Canada and Mexico. But Daniel Caspary, the head of her center-right party's faction in the European Parliament, did little to hide his displeasure, writing on Twitter that Trump's move "will hurt the U.S., the EU and the transatlantic relationship".

Europe has been bracing for the U.S.to place the restrictions even as top European officials have held last-ditch talks in Paris with American trade officials to try to avert the tariffs.

The European Commission, which coordinates trade policy for the 28 EU members, has said the bloc should be permanently exempted from the tariffs since it was not the cause of overcapacity in steel and aluminium.

"This is protectionism, pure and simple", he said.

The Trump administration is making good on its threat to slap Canada with hefty steel and aluminum tariffs, setting the stage for a possible trade war and leaving Prime Minister Justin Trudeau in the middle of a very divided group of leaders at next week's G7 summit. It is the top buyer of US aluminum and the second buyer of USA steel, the economy ministry said.

Exports: About half of Canada's production is exported, mostly to the U.S.

The Trump administration announced that the U.S will impose tariffs on steel, aluminum imports from Europe, Canada and Mexico, as a previously designated exemption expires tonight at midnight.

Although the USA market amounts to a low single-digit percentage of German steel industry output, German politicians and industry groups have said they are concerned that tit-for-tat measures could end in damaging tariffs on foreign automobiles, an outcome that Trump has repeatedly threatened.

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U.S. Commerce Secretary Wilbur Ross, in announcing the tariffs, said Nafta talks are "taking longer than we had hoped" to wrap up.

"If any of these parties does retaliate, that does not mean that there can not be continuing negotiations", he said.

Both Mexico and the European Union announced retaliatory tariffs in response to Trump's announcement, with Mexico promising to slap taxes on American steel products, pork and various agriculture, and the European Union imposing taxes on imported American bourbon, jeans and motorcycles, among other products.

"Throughout these talks, the USA has sought to use the threat of trade restrictions as leverage to obtain concessions from the EU", Malmstrom continued in a statement. Given the delicate nature of these issues, which have vast implications for Mexico and Canada's economies, Trump's saber rattling may hurt more than help according to Alden.

Hitting Canada and Mexico with the tariffs could be a huge blow to Nafta talks.

The Commission will also immediately begin a dispute settlement with the World Trade Organisation.

By increasing the cost of imported steel and aluminum, companies that rely on the metals will be forced to either accept the higher costs and lower profits or pass on the price increase to consumers.

"There is potential flexibility going forward", Ross said.

The U.S. interprets a threat to national security to be applicable to any threat to American industry, or economy for instance.

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