Businesses warned that there could be no winners in a trade war as the European Union, Mexico and Canada drew up retaliatory measures on Friday (1 June) following President Donald Trump’s decision to go ahead with the imposition of tariffs on steel and aluminium imports to the US.

Response to imposed tariffs

Earlier this year, when Mr Trump first announced that his closest neighbours and allies could be subject to the tariffs he was imposing on China, the EU issued a list of US goods that could be subject to new tariffs, ranging from bourbon and orange juice, to jeans and motorcycles.The EU is also planning to challenge the legality of the US tariffs, which Mr Trump has imposed using powers vested in the president when national security is supposedly at stake, at the World Trade Organisation.In the UK, the steel industry employs about 31,000 people and exports £360 million of products to the US each year. Ironically, much of these high-grade materials go to America’s defence industry.

Potential of a trade war

Gareth Stace, director of the trade body UK Steel, said, “President Trump had already loaded the gun and we now know that the US administration has unfortunately fired it and potentially started a damaging trade war.“Since President Trump stated his plans to impose blanket tariffs on steel imports almost three months ago, the UK steel sector had hoped for the best, but still feared the worst. With the expiration of the EU exemption now confirmed to take effect (on Friday), unfortunately our pessimism was justified and we will now see damage not only to the UK steel sector, but also the US economy.”Tata Steel, the Indian-owned industrial giant that employs almost 7,000 workers in Wales, said it was pressing the EU to take “swift and robust action” in response to the US tariffs.Henrik Adam, chief commercial officer of Tata Steel in Europe, said, “We have been, and will continue, to work closely with our customers on potential product exclusions as the vast majority of the products Tata Steel Europe exports to the US cannot be made by US steel companies, such as our extra wide strip, battery quality hot rolled material as well as certain packaging steels.“We now call on the EU Commission to take swift and robust action to combat the indirect effects of these tariffs.“We must ensure our markets are not destabilised by millions of tonnes of steel being diverted away from the US and into Europe. The European Commission now needs to put in place protection measures on a provisional basis without delay.”

No winners in a trade war

But Ben Digby, international director at the Confederation of British Industry, warned that there would be no winners if the US measures led to an all-out trade war, and called for moderation by the EU in retaliatory moves.“The president’s measures are deeply concerning for firms in the UK, for close trading partners and across supply chains,” he said. “Over-production can distort the global market and erode the level playing field that business depends on to stay competitive.“But this is a shared challenge whose root causes should be tackled jointly by the EU and the USA. There are no winners in a trade war, which will damage prosperity on both sides of the Atlantic. These tariffs could lead to a protectionist domino effect, damaging firms, employees and consumers in the USA, UK and many other trading partners.“Now is not the time for any disproportionate escalation, and we urge the EU to consider this when initiating its response. The UK is the largest foreign investor in America, and British companies support over 1 million jobs in the States, stretching from Alaska to New York. We must work with the USA to find a way out of this current scenario that preserves our economic links, and we will continue working urgently with the US administration to protect British trade, jobs and growth.“We hope that the USA will swiftly reconsider its decision, and we will be pressing home the importance of our transatlantic relationship with our counterparts and government figures in Washington, London and Brussels in order to protect the free and fair trade that is the key to our economic future.”

Damage to companies in the UK

Adam Marshall, director-general of the British Chambers of Commerce, said it was “hugely disappointing” that Mr Trump had decided to press ahead with tariffs that would hurt companies and communities in many areas of the UK, as well as their customers in the US.He said, “The UK government must reach out to and support the many supply chain businesses that face becoming the ‘collateral damage’ of the Trump administration’s protectionist push. British ministers must also work hand in hand with the EU to avoid any further escalation and to find a long-term solution.“As the UK leaves the EU, the American government’s decision to impose punitive tariffs is a helpful reminder that self-interest looms large in trade negotiations. Ministers should reflect on this carefully before they pursue any future trade deal between the UK and the USA.” For related news and features, visit our Enterprise section.Relocate’s new Global Mobility Toolkit provides free information, practical advice and support for HR, global mobility managers and global teams operating overseas.Access hundreds of global services and suppliers in our Online Directory 

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