EU-US trade war looming

US president Donald Trump, who campaigned on protectionist policies, is considering imposing tariffs on major exporters of steel and other goods such as paper, semiconductors, aluminum, and large household appliances. To do so, Trump initiated a law which has been used twice before - on oil in 1999 and iron and steel in 2001. The measure allows the president to impose restrictions on imports for reasons of national security. President Trump fears that US steel companies could close as they would not be able to compete with Chinese firms. He also argues that the US is too dependent on foreign steel for military equipment and infrastructure like roads and bridges.

Should steel-producing nations turn against the US, the Trump administration says it wouldn't be able to build tanks and other essentials to defend itself. While Trump is seeking to penalize China by putting a curb on steel imports, the measure would most likely affect other major allies of the US including the EU which is among the top steel exporters to the US. This could spark a trade war between the US and the world’s biggest economic bloc, the EU.

Russia has played a part in the US trade war scenario The US has slapped Russia with economic sanctions over its alleged meddling in the 2016 race for the White House. That’s a charge Russia categorically denies. Under the US economic measures, the amount of money Americans can invest in Russian energy projects will be limited given implications set to hit Russian energy, finance, transport and mining. While the sanctions make it difficult for the American companies to do business with Russia, they also affect the trade between European companies and Russia.

The future of the Nord Stream-2 natural gas pipeline project from Russia to Germany is of particular concern to Europeans. Roughly a third of the European Union's natural gas supply still comes from Russia. Germany’s economics and energy minister has warned Donald Trump that a trade war could erupt between the US and EU after America agreed a deal for increased sanctions against Russia.

The EU is not sitting idle. the European Union is considering retaliatory tariffs against the US if President Donald Trump follows through on his plan to impose restrictions on the imports of steel.

EU Trade Commissioner Cecilia Malmstroem said the bloc was making preparations to retaliate in the event the US introduces new tariffs, adding that indications are that such measures would mean the bloc would be unjustifiably hit. The trade defenses thought to be under consideration by the EC are known as “safeguarding measures”. They could be quickly introduced, imposing large tariffs on imports in weeks, rather than the months normally taken.

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