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Europe could hit Harleys, bourbon and Levi's over Trump's tariffs

Europe says it's ready to respond to President Trump's announcement of steep tariffs on steel and aluminum."We...

Posted: Mar 2, 2018 2:00 PM
Updated: Mar 2, 2018 2:00 PM

Europe says it's ready to respond to President Trump's announcement of steep tariffs on steel and aluminum.

"We have been preparing for this situation for a long time," Alexander Winterstein, a spokesman for the European Commission, told reporters on Friday. "Because of these preparations, we are ready."

Winterstein did not detail the European Union's response, but he said the "counter measures" would be swift, firm and proportional.

Trump said Thursday that he would impose a 25% tariff on steel imports and a 10% tariff on aluminum imports, a move that has been vociferously condemned by key US allies and trading partners.

The justification for the tariffs - national security concerns -- also drew harsh criticism. German Foreign Minister Sigmar Gabriel described the administration's reasoning as "incomprehensible."

"The EU must respond decisively to US punitive tariffs, which endangers thousands of jobs in Europe. There should be no doubt about that in Washington," Gabriel said on Friday.

Winterstein said the 28 countries of the EU would respond to the tariffs as a single bloc. The Commission will discuss its response when it next meets on Wednesday.

One obvious move would be to file a complaint against the US with the World Trade Organization. Analysts at UBS said Europe would have a good chance of winning, but that could take 18 months.

In the meantime, the EU could introduce "safeguard measures" if it suddenly sees a surge in steel imports, Winterstein said. These measures could include tariffs or import quotas and can be enacted quickly.

Related: China will use Trump's tariffs to its advantage

US trading partners are worried about how the sizable taxes will affect demand for their steel and aluminum exports. They're also concerned that steel that may have gone to the US will instead flood into their markets.

Some key US trading partners may be made exempt from the tariffs - but it's not clear which countries, if any, will be spared.

Affected countries aren't likely to take a big economic hit lying down.

"This is the opening salvo in a trade war. The countries we deal with are not going to sit there and take this," said Phil Levy, a senior fellow at the Chicago Council on Global Affairs.

Analysts say that China's response will be especially important.

Beijing could retaliate by imposing punishing measures of its own on major US exports such as soybeans or airplanes. Or it could put the squeeze on top American companies that do big business in China, such as Apple and Intel.

Trump will implement the tariffs under Section 232 of the Trade Expansion Act. To do that, he must claim that steel and aluminum imports hurt the country's national security.

Critics say that justification is a stretch, and makes a mockery of international trade rules.

"It is entirely inappropriate to view any trade with Canada as a national security threat to the United States," Canadian Foreign Minister Chrystia Freeland said in a statement.

Other US allies including South Korea and Australia also issued statements criticizing the tariffs.

Related: Trump tariffs on steel would the entire global trading system

The Trump administration has been considering tariffs on metals for months, giving other countries time to prepare their responses.

The EU is the second largest producer of steel in the world after China. The bloc produces around 170 million metric tonnes of steel a year, accounting for 10% of global output, according to the World Steel Association.

-- CNN's Alanna Petroff and Nadine Schmidt contributed reporting.

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