Trump trade war could spell doom for UK steel industry

The risk of a global trade war has increased over the past four days after Donald Trump threatened to slap hefty tariffs on imported steel and aluminium.

Here, we look at what it all means.

Trade wars, what are they good for?

The US steel manufacturing industry, Mr Trump hopes.

The president's plan for a 25% tariff on steel imports and 10% on aluminium means that US steel producers would likely see increased domestic demand as imports become more expensive.

The news has played well to workers in the US steel and aluminium industries, which are largely concentrated in the Midwest "rust belt".

US manufacturers would also have enhanced pricing powers as the cost of foreign imports would become prohibitive for those buying steel.

However, US steel consumers would have less choice and could be forced to pay more for steel products.

What does this mean for the UK?

The US has made clear that no countries will be exempted from the tariffs, raising acute fears for British exporters.

Britain's steel industry exports £360 million worth of products into the US every year, almost 15% of the sector's total exports.

Gareth Stace, the director of trade body UK Steel, said: "In short, these measures would cause serious damage to the prospects of many steel producers here."

What can the British Government do about it?

Theresa May attends church
Prime Minister Theresa May has told Donald Trump of her 'deep concern' at his plan (Steve Parsons/PA)

Theresa May's Government is holding out hope for a trade deal with the US that will make up for the inevitable loss of trade that comes with leaving the EU's single market and customs union.

With the UK quitting the most powerful trading bloc in the world - the EU - it cannot risk alienating those it seeks new trading relationships with, so options are limited.

But Mrs May has told Donald Trump of her "deep concern" at his plan.

A Downing Street spokeswoman said over the weekend: "The Prime Minister raised our deep concern at the president's forthcoming announcement on steel and aluminium tariffs, noting that multilateral action was the only way to resolve the problem of global overcapacity in all parties' interests."

What is the EU doing about it?

.@JunckerEU speaking to TV journalists in Hamburg on #Trump#SteelTariff: "#Europa braucht wehrhafte Handelspolitik. Werden nicht naiv sein. // #Europe needs #trade policy that is able to defend. We will not be naiv."

-- Mina Andreeva (@Mina_Andreeva) March 2, 2018

Jean-Claude Juncker, the European Commission president, has said that in retaliation the EU would raise tariffs on US goods such as Kentucky bourbon, Levi's jeans and Harley-Davidsons.

Raising the stakes further still, Mr Trump said the US would then put an import tax on cars made in the EU.

The president said on Twitter: "If the EU wants to further increase their already massive tariffs and barriers on US companies doing business there, we will simply apply a Tax on their Cars which freely pour into the US. They make it impossible for our cars (and more) to sell there. Big trade imbalance!"

Viraj Patel, foreign exchange strategist at ING, said: "The risks of some sort of 'global trade war' taking place has certainly increased."

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