BREAKINGVIEWS-Global trade tantrum will yield diminished returns

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

By Gabriel Rubin

WASHINGTON, Feb 11 (Reuters Breakingviews) - The U.S. is rattling all its sabers at once. Following early threats against North and South American allies, President Donald Trump is now going bigger, imposing no-exceptions-allowed 25% levies on steel and aluminum and vowing “reciprocal" tariffs to match any that trading partners impose. If he follows his emerging pattern of pulling back on threats after winning concessions, Trump could score quick victories in targeted areas. But with U.S. goals either vague or difficult to address, it will be harder to take any wins.

The metals tariffs are slated for March 4 implementation, while details remain murky on reciprocal tariffs. After quickly discounting the threat of damage to home industries from promised levies last time around, investors now seem to be moving on to eagerly anticipating upside: stock prices of U.S. steelmakers Nucor NUE.N and Cleveland-Cliffs CLF.N rose following the latest announcement, while those of Asian and European peers fell.

Stand-offs with Mexico and Canada were defused with repeated promises on border enforcement. Others took the hint: EU leaders are preparing to offer to reduce tariffs on U.S. cars to 2.5% from 10%, the Financial Times reported. India is reviewing levies on 30 goods categories for potential cuts.

If he takes this proffered deal, Trump would be effectively inverting the approach of his predecessor. By targeting key exports – like electric vehicles and semiconductors – Joe Biden sought to support certain home industries without disrupting the entirety of the $439 billion in goods the U.S. imports from the People’s Republic. Nor did the $18 billion of extra levies introduced in mid-2024 pose the inflation risk that general tariffs would.

Trump instead is threatening massive impacts on everyone to advance U.S. policy goals through blunt force. It fits the criticism leveled by his aides on, say, Biden's exemption of European steel and aluminum from tariffs to allow for negotiations around over-capacity. The goal, they say, is to shift production back to the U.S., where steel manufacturing tumbled in the 1970s and flatlined afterwards. Problem is, there’s no quick way for other countries to mend this issue without throttling their own industries. In the meantime, uncertainty will raise costs for businesses and consumers.

Stephen Miller, a Trump aide, said on Sunday that reciprocal tariffs show the U.S. demands “fair treatment.” If the administration throws out allies’ offers, fairness could end up meaning that everyone pays more and trades less.

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CONTEXT NEWS

U.S. President Donald Trump signed an order on February 10 to impose 25% tariffs on steel and aluminum imports, up from 10% with significant exemptions for allied countries.

Trump said he would impose reciprocal tariffs on countries that place levies on U.S. goods as early as February 11, though no order has yet been signed.