Trump's Tariffs Explained

What are they, how has the world reacted and what are the implications for Britain and global trade?

  • Trump has announced big taxes on US imports of metals from the EU, Canada and Mexico

  • Yet China was the main target during his fiery US presidential campaign

  • Move draws criticism from the US's trading partners and allies

  • Here we explain what has happened and set out the reactions and implications

  • China is at the heart of Trump's strategy on global trade operations

Donald Trump's administration last night imposed new trade tariffs on steel and aluminium imports into the US from the EU, Canada and Mexico.

Yet China is the country really at the heart of Trump's decision-making strategy on trade.

During his presidential campaign, Trump accused China of flooding the global market with cheap metals, triggering job losses in the US and an 'unfair' market.

Early on, Trump vowed to impose taxes and tariffs on imports to the US from China in a bid to create a more level playing field, or, at least, one that favoured the US.

But instead it is the US's closest allies like the UK and the EU, and nearest trading partners Canada and Mexico, that are now bearing the brunt of Trump's determination to follow through on his campaign promises.

Together they exported around £17billion worth of steel and aluminium to the US in 2017, equating to nearly half of the total steel and aluminium imports.

Now, these imports will be slapped with a 25 per cent and 10 per cent tax respectively.

The tariffs will hit a wide range of products, including plated steel, slabs, coil and rolls of aluminium, all of which are used extensively within the US manufacturing, oil and construction sectors.

The new tariffs took effect at midnight on Thursday 31 May. Here we explain China's role in all this, why Trump has done it, and what a trade war will really mean.

What is China's role in all this?

China was the country that was in Trump's sights during his presidential campaign.

Yet looking at recent figures compiled by the Peterson Institute for International Economics, China made $2.9billion worth of steel and aluminium imports to the US last year.

That's a lot lower than steel and aluminium imports from Canada and the EU to the US.

Chad Brown from PIIE said: 'We don't buy steel and aluminum from China. We buy it from our allies.'

How hard has Trump's office hit China's trade network so far?

In March, the president threatened tariffs on an additional $50billion in Chinese goods later this month - although the extent and details of these have ranged backwards and forwards in announcements since.

China is also subject to the steel tariff but, as explained above, does not export much of the metal to the US so is relatively unaffected. For the moment, it seems like Trump has imposed heavier tariffs on his supposed allies than China.

Speaking as news of the original tariffs broke in March, Chad Brown from PIIE said: 'President Trump and Commerce Secretary Wilbur Ross repeatedly single out China as the principal target of the administration’s actions.

'But earlier trade restrictions already cover nearly 94 percent of US imports of steel products from China. As a result, Trump’s 25 percent tariff would have less impact on China than on other producers, many of them important security allies of Washington.'

According to an official from president Obama's era, Trump's metal tariffs announced today serve as a 'gift' for China.

'The world was aligned with the United States in recognizing China's threat around steel and aluminum', Robert Holleyman, a former deputy US trade representative, told CNBC.

He added: 'We've now turned our ally Canada into a potential ally of China on these issues. It's nonsense, it's costly, it'll hurt exporters.'

What's happening now when it comes to trade relations between the US and China?

The US is in the midst of crucial but protracted trade negotiations with China - in a bid to cut America’s $375billion trade deficit with Beijing.

Senior US officials are in Beijing preparing for a third round of high-level trade talks scheduled for Saturday. Analysts have warned of the risk of a full-blown trade war for the global economy and the markets.

While Trump risks alienating his traditional trading allies, he could be using this as a bargaining tool to justify raising further tariffs on China - as he can claim they are being treated the same as other nations.

'The Trump administration seems to regard overt threats, including tariffs and repudiation of previous agreements, as a key element for gaining leverage in trade negotiations,' said Eswar Prasad, a former head of the International Monetary Fund’s China division and now a professor at Cornell University.

Canada, Mexico and the EU together exported around £17billion worth of steel and aluminium to the US in 2017

Prasad warned that the United States was doing so at the cost of alienating key allies and undercutting broad international pressure on China.

Chinese foreign minister Wang Yi today said that in the dispute with the US, Beijing would 'not only try to uphold China's own interests but also uphold international rules and the global free trade system'.

Mr Wang said China will seek 'more concrete and in-depth discussions' with the US in the hope of finding a 'mutually beneficial outcome'.

'China is a responsible nation in international interactions,' he said. 'We always honour our words. That said, we also expect our partners to be keeping their words as well.'

Why has Trump done this?

Trade played a major role in Trump's presidential campaign back in 2016. During that campaign, he blamed unfair global trade deals on job losses within the US.

Since 2000, 50,000 jobs have been lost in the steel industry and 40,000 in the aluminium factories.

Speaking at a metals recycling facility in Monessen, Pennsylvania, in June 2016, Trump said: 'We tax and regulate and restrict our companies to death and then we allow foreign countries that cheat to export their goods to us tax-free. How stupid is this? How could it happen? How stupid is this?'.

He added: 'We are going to put American steel and aluminium back into the backbone of our country.'