March 7–As U.S. President Donald Trump stood by his plan to raise import tariffs on steel and aluminum, the European Union threatened to retaliate with tariffs on U.S. exports of industrial, steel and agricultural products, a top EU trade official said.

If the United States goes forward with imposing tariffs, the EU will respond in a “proportionate and balanced way,” Cecilia Malmström , the EU Commissioner for Trade, said on March 7 in Brussels.

Malmström pointed out that the United States has not yet taken action on the tariffs Trump announced late last week. If Trump moves forward — as he is expected to do — the EU would likely impose its own across-the-board tariffs on steel and aluminum to make up for an expected surge in imports. Furthermore, she said, the EU would likely take legal action against the United States in the World Trade Organization.”We have serious doubts about whether this is WTO compatible,” she said.

Exemptions and Waivers

White House Press Secretary Sarah Sanders said she expects Trump to make the tariffs official by the end of the week. In comments to press, Sanders indicated Trump may provide “potential carve-outs for Mexico and Canada based on national security, and possibly other countries, as well, based on that process.”

Other administration officials seem to concur that the U.S. government might exempt some U.S. trading partners from the tariffs.

According to a news report by Canada-based CTV News, Commerce Secretary Wilbur Ross told CNBC news that the president has “indicated a degree of flexibility” with the tariffs. And Treasury Secretary Steven Mnuchin told Fox Business that, “there will be a mechanism where, to the extent that the president wants to give waivers, the president can do that.”

Tariffs For ‘National Security’

Trump is justifying the new tariffs under a U.S. law that allows a president to take action if an imported item is thought to threaten national security. It is referred to as Section 232 of the Trade Expansion Act of 1962.

Two Commerce Department reports released in January 2018 argue that steel and aluminum imports “threaten to impair the national security,” as defined by Section 232.

According to the 262-page report on steel, the definition of national security under Section 232 extends to economic welfare of the nation. Specifically, the Commerce Department determined in 2001 that “in addition to the satisfaction of national defense requirements, the term ‘national security’ can be interpreted more broadly to include the general security and welfare of certain industries, beyond those necessary to satisfy national defense requirements that are critical to the minimum operations of the economy and government.”

Furthermore, it says steel is essential to U.S. national security because it is needed by the Defense Department and in critical infrastructure like transportation systems, the electric power grid, water systems, and energy generation systems.

Likewise, the 239-page report on aluminum says it is essential for U.S. national security because 1.) the Defense Department needs it and 2.) it is essential for critical infrastructures, such as power transmissions, transportation systems, manufacturing industries and construction.

‘Alarming’ Justification

European trading partners are not buying the U.S. reasoning. Malmström said she finds the U.S. justification for tariffs “alarming.” She warned that it would affect U.S.-EU relations as well as the global trading system itself.

“We find that assumption deeply unjust,” Malmström said. “This would be damaging to the Trans-Atlantic relations as well but potentially also to a global rules-based system.”

Although Europe is not a major exporter of steel to the United States, the U.S. tariffs would likely cause an influx of cheap steel to European markets. Europe would, therefore, impose its own safeguard measures to protect its industries, Malmström said.

Meanwhile, she said she agrees the industry faces a problem of global overcapacity, due to production in countries with massive state subsidies and non-market conditions.

‘Here to Protect’

Meanwhile, President Trump reiterated his position during a March 6 press conference with Swedish Prime Minister Stefan Löfven.

“I’m here to protect,” Trump said. “One of the reasons I was elected is I’m protecting our workers, I’m protecting our companies…. So we’re doing tariffs on steel. We cannot lose our steel industry. It’s a fraction of what it once was. And we can’t lose our aluminum industry. Also a fraction of what it once was.”