‘Ball and chain’: Trump’s tariffs still a drag on global trade cooperation

Por Oliver Ward and Koen Verhelst — POLITICO – TOP Stories

President Donald Trump wants U.S. allies to unite against China’s trade tactics. He got a fresh reminder this week about how much his tariffs are making that a harder sell.

At the annual G20 trade ministers meeting in Milwaukee, the U.S. asked the world’s other top economies for help addressing four U.S. trade priorities, including combating a glut of low-cost Chinese manufactured products and forced labor in supply chains.

It secured consensus on just one of those priorities, U.S. Trade Representative Jamieson Greer said Thursday — on language condemning the weaponization of food trade.

And even that agreement was largely meaningless, according to Polish Finance and Economy Minister Andrzej Domański.

“There is consensus that food should not be used as a weapon. Of course, there is no consensus on who is using food trade as a weapon,” Domański said, pointing the finger at “what Russia is doing on the Black Sea” to block grain from Ukraine.

The divisions underscore the challenges the Trump administration faces trying to secure buy-in for its global trade priorities — particularly vis-a-vis China — after spending the better part of two years hammering traditional allies with a steady tide of tariffs. Trump’s recent stances, from a chummy summit with Chinese leader Xi Jinping to a push to expand U.S. steel supply beyond the country’s current demand, only add to the doubts.

A European Union official, granted anonymity to speak candidly about the closed door discussions, agreed that Trump’s blanket tariffs on steel, aluminum and other manufacturing sectors “negatively impact” efforts to coordinate on an issue like China’s flood of exports, which much of the West otherwise agree on.

The 27-country bloc has been swamped by cheap Chinese imports in recent years that are threatening to hollow out its manufacturing sector. Speaking in Spain on Wednesday, French President Emmanuel Macron criticized China for unfairly subsidizing its domestic producers and urged the European Commission to deploy more safeguards to protect European industry.

And top EU trade official Maroš Šefčovič told POLITICO Thursday that he raised the issue with Chinese Vice-Minister Li Chenggang in Milwaukee.

But European countries did not agree to sign onto anything binding to combat the problem this week in Wisconsin. Instead, a 28-country coalition unveiled a framework Wednesday that outlined measures countries could take to bolster monitoring of steel supplies, curb harmful subsidies and erect trade defenses.

Domański said in an interview Thursday that the international steel trade framework is completely optional for the countries that adopted it.

“But we have some progress and we’re going to have other meetings on this,” he added.

Steel is a particularly sensitive issue for many countries given its importance for national security. Canadian International Trade Minister Maninder Sidhu outlined to reporters Thursday the challenges of coaxing countries into ending trade-distorting support for the sector.

“For sovereignty, you need the steel industry,” Sidhu said, adding that he welcomed the conversation to support the sector and its workers.

Greer highlighted that general agreement, telling reporters at a press briefing Thursday afternoon that nearly all of members of the G20, which includes China, Mexico, the United Kingdom, Germany, Japan and France, agreed that manufacturing overcapacity is a problem and that global responses have thus far failed to address the issue. But he acknowledged that consensus on concrete action remained out of reach.

Trump’s own actions this week illustrate why it remains a tough sell with foreign leaders.

The U.S. has denounced Chinese investments in steel capacity that aren’t driven by market forces or principles. But on Tuesday, as trade ministers were en route to Milwaukee, Trump announced the construction of a new $15 billion steel plant in Iowa by Mesabi Metallics, a Minnesota-based company owned by Indian conglomerate Essar Group. If completed, the plant would be the largest ever built in the U.S. and would eventually produce an additional 10 million tons of steel annually.

The U.S. already has more steel production capacity than demand can currently support. The move risks contributing to the steel overcapacity problem the U.S. is trying to address, said Scott Lincicome, vice president of general economics at the Cato Institute’s Center for Trade Policy Studies.  

The most likely result from adding U.S. steel capacity at this time, is “a China-style glut,” he said.

Greer denied the plant would contribute to the type of global trade shocks that China’s government subsidies and other industrial policies have created.

“We’re trying to support our supply chains in the U.S. We’re not trying to create excess production. We’re not trying to corner global markets on a certain good or commodity. We’re not trying to undermine industries overseas,” he said. “We’re trying to provide jobs in places like Milwaukee and Wisconsin. We’re trying to bring back supply chains.”

Discussions around forced labor followed a similar pattern.

Political leaders around the world widely agree they want to eliminate forced labor practices on their shores and keep products made that way in other countries out of their supply chains. But Greer said Thursday that the U.S. secured support from just a handful of countries on its joint statement on eliminating the practice from global trade.

Many G20 countries are still smarting from Trump tariffs adopted over the summer on more than 80 countries, which the administration justified by claiming their governments haven’t done enough to combat forced labor in their supply chains.

Countries have argued that the forced labor tariffs are just a pretense for the White House to rebuild the tariff regime that was hollowed out by a February Supreme Court ruling that struck down many of the president’s previous “reciprocal” tariffs.

Brazilian Trade Minister Marcio Elias Rosa stressed to reporters again on Wednesday that the 12.5% tariff applied to his country’s exports is unjust and said his government is trying to negotiate tariff reductions as part of a forthcoming trade deal.

A lawsuit challenging the forced labor tariffs makes a similar argument. As one of the lawyers for the plaintiffs argued in federal court on Wednesday, the evidence the administration used to underpin its forced labor claims was almost exclusively focused on one country: China.

“It’s not good enough to say the entire world launders the cotton products from China and therefore they adversely impact the U.S. economy,” the lawyer, Pratik Shah, said at the New York-based U.S. Court of International Trade.

Speaking at a press briefing Thursday afternoon, Greer dismissed the suggestion that U.S. tariff hikes and threats on key partners and allies had hurt his ability to build consensus in Milwaukee, arguing U.S. trade actions didn’t feature “prominently” in the talks.

“A lot of that is because over the past year and a half, we’ve actually made deals with a lot of our trading partners, and we’ve moved along to a very constructive spot,” Greer said.

But former assistant U.S. Trade Representative Harry Broadman is skeptical, arguing that Trump’s trade policy has become a “ball and chain” around officials’ efforts to collaborate on global issues.

“People sort of roll their eyes and say, ‘Okay, so what’s what? What are they going to table next?’”

Julius Brinkman contributed to this report. 

Fonte: POLITICO – TOP Stories