Trump sets steel and aluminum tariffs but exempts Canada, Mexico

WASHINGTON (Reuters): U.S. President Donald Trump pressed ahead on Thursday with import tariffs of 25 percent on steel and 10 percent for aluminum but exempted Canada and Mexico and offered the possibility of excluding other allies, backtracking from an earlier “no-exceptions” stance.

Describing the dumping of steel and aluminum in the U.S. market as “an assault on our country,” Trump said in a White House announcement that the best outcome would for companies to move their mills and smelters to the United States. He insisted that domestic metals production was vital to national security.

“If you don’t want to pay tax, bring your plant to the USA,” added Trump, flanked by steel and aluminum workers.

Plans for the tariffs, set to start in 15 days, have stirred opposition from business leaders and prominent members of Trump’s own Republican Party, who fear the duties could spark retaliation from other countries and hurt the U.S. economy.

Within minutes of the announcement, U.S. Republican Senator Jeff Flake, a Trump critic, said he would introduce a bill to nullify the tariffs. But that would likely require Congress to muster an extremely difficult two-thirds majority to override a Trump veto.

Some Democrats praised the move, including Senator Joe Manchin of West Virginia, who said it was “past time to defend our interests, our security and our workers in the global economy and that is exactly what the president is proposing with these tariffs.”

Trump’s unexpected announcement of the tariffs last week roiled stock markets as it raised the prospect of an escalating global trade war. He appeared to have conceded some ground after concerted lobbying by Republican lawmakers, industry groups and U.S. allies abroad.

Canada, the largest supplier of both steel and aluminum to the United States, welcomed the news it would not immediately be subject to the tariffs, but vowed to keep pressing Washington until the threat of tariffs had disappeared.Trump offered relief from steel and aluminum tariffs to countries that “treat us fairly on trade,” a gesture aimed at putting pressure on Canada and Mexico to give ground in separate talks on renegotiating the North American Free Trade Agreement.

Mexican Economy Minister Ildefonso Guajardo said NAFTA talks were “independent” of Trump’s tariff actions and should not be subject to outside pressure.

In Beijing, China’s Commerce Ministry said on Friday it “resolutely opposed” the tariffs and that they would “seriously impact the normal order of international trade.”

While Chinese steel exports to the United States have been suppressed by previous anti-dumping duties, the broad “Section 232” national security tariffs are widely seen as aiming to pressure Beijing to cut excess steel and aluminum production capacity that has driven down global prices.

U.S. steel stocks, which have gained for weeks on anticipation of the tariffs, fell after the announcement, with the Standard and Poor’s composite steel index .SPCOMSTEEL ending down 2.53 percent against a half percent gain in the broad S&P 500 .SP500 index.

A senior Trump administration official said other countries could seek talks with U.S. Trade Representative Robert Lighthizer to find “alternative ways” to mitigate the threat to U.S. national security posed by their steel and aluminum exports to the United States.

It was unclear whether they would involve quotas or voluntary export restraints, but the official said that permanent exemptions for Canada and Mexico might result in higher tariffs on other countries to maintain 80% capacity usage targets for domestic producers.

European Union Trade Commissioner Cecilia Malmstrom said: “The EU is a close ally of the U.S. and we continue to be of the view that the EU should be excluded from these measures. I will seek more clarity on this issue in the days to come.”

U.S. steel- and aluminum-consuming industries sharply criticized the tariffs as damaging them with higher costs.

“The U.S. will become an island of high steel prices that will result in our customers simply sourcing our products from our overseas competitors and importing them into the United States tariff-free,” the Precision Metalforming and National Tooling and Machining associations said in a joint statement.

Several major trading partners have said they might respond to the tariffs with direct action.

Countermeasures could include European Union tariffs on U.S. oranges, tobacco and bourbon. Harley-Davidson Inc (HOG.N) motorcycles have also been mentioned, targeting Republican U.S. House of Representatives Speaker Paul Ryan’s home state of Wisconsin.

Even as Trump threatened tariffs and prodded his NAFTA partners, 11 nations gathered in Chile to sign a landmark Asia-Pacific trade pact, one that Trump withdrew from on his first day in office last year.

Trump, who won the White House after a career in real estate and reality TV, has long touted economic nationalism, promising to bring back jobs to the United States and save the country from trade deals he views as unfair. That has put him at odds with many in his Republican Party, traditionally a supporter of free trade.