Since March of this year, talk of increased tariffs has prompted rifts both in the United States and abroad. Following the U.S. departure from the G-7 Summit without signing the Communique, along with President Trump’s tariff Tweets, historic trading partners are now posturing themselves as adversaries while the possibility of a multi-front trade war increases.
On May 31, the United States announced the imposition of tariffs on imports of certain steel and aluminum products from U.S. trading partners at the rates of 25% and 10%, respectively.
Many question the motivations behind the recent U.S. policy shift. The Trade Partnership, a consulting firm that researches the impacts of trade policies, reported that while steel and aluminum employment will increase by 26,280 jobs, agricultural employment is expected to drop by 7,000 jobs.
It is estimated that the rest of the economy will experience a net loss of 400,000 jobs, meaning that sixteen jobs would be lost for every one steel or aluminum job gained. Despite the nonpartisan group’s criticism of the announced tariffs, the President appears to remain devoted to protecting the American manufacturing industry.
Since the President’s initial announcement, multiple allies expressed their vehement opposition to the tariffs, and three out of the eight largest steel importers to the U.S., Canada, Mexico, and the European Union (EU), are all set to retaliate against the United States, targeting billions of dollars in exports.
Canada, for example, in response to the U.S. announcement, issued a notice publicizing its intent to impose countermeasures against the U.S. with harsh tariffs on U.S. exports. Should Canada retaliate with trade countermeasures, over $12 billion worth of U.S. goods would be targeted.
The goods identified in the notice include a vast amount of agricultural and foods products, including insecticides, fungicides, herbicides, coffee, maple syrup, beer, ketchup, cucumbers and strawberry jam, among others, which will be subject to a 10% surtax or other trade-restrictive measures.
EU Tariffs Will ‘Reflect Damage’
The proposed countermeasure will take effect July 1 and will remain in place until the U.S. eliminates its trade-restrictive measures against Canada.
Similarly, the EU has made it clear that it will not negotiate under threat. After months of preparation, the EU now stands ready to react to the U.S. trade restriction. It published a list of over 100 products that will be subject to either a 10%, 25%, 35%, or even 50% increase in import duties. The products subject to the increase include agricultural items like orange juice, cranberry juice, peanut butter, sweetcorn and rice.
EU argues that “the level of tariffs to be applied will reflect the damage caused by the new U.S. trade restrictions on EU products”. Not only do the EU’s countermeasure target more than $3 billion worth of U.S. products, but the EU also plans to impose duties between 10% and 50% on over $4 billion worth of U.S. goods if the WTO finds the initial U.S. tariffs violate international law.
Following suit, Mexico responded to the tariffs with a list of their own impositions on U.S. products. The tariffs, which directly target American agriculture products like pork shoulders and legs, apples, ham, potatoes, and some cheeses, mandates that all U.S. products listed lose their preferential NAFTA tariffs treatment and instead are faced with an individual tariff increase of anywhere from 15% to 25%. Mexican officials even stated that the retaliatory tariffs are intended to inflict harm on specific communities that are represented by “people who have a voice and vote in the American Congress” and are expected to go into effect on July 5.
Mexico And Canada Targeting The U.S.
These nations meticulously focused their tariffs on agricultural exports for two primary reasons. First, nearly 40% of all U.S. agricultural products are exported. Second, they believe the most effective deterrent to U.S. imposed tariffs is a calculated economic strike on Trump supporters and the districts in which they reside.
Their goal, based on the premise that the agricultural community favors Republican politicians, is to attack the livelihood of farmers living in Republican-controlled states and districts, in order to alter the composition of Congress, come the midterm elections. They hope a Democratic Congress would place pressure on the Executive branch to alleviate the current tariffs, and ensure that these atypical relations remain atypical.
While the overarching motivation from the other nations may be to bring the U.S. back to the negotiating table, the current agricultural tariffs have the potential of creating devastating consequences responsible for almost half of the gross income of American agriculture.
[This column is published for the purposes of providing a general understanding of the law. It is in no way a substitute for individual legal consultation and anyone with a legal problem should not rely on these answers but should instead consult their attorney. If you have a legal problem and do not know an attorney, call your local Bar Association’s Lawyer Referral Service.]