(Representative Image) Photograph:( Reuters )
The United States Department of Commerce on Thursday announced that a temporary exemption from US tariffs on steel and aluminium imports from the European Union, Canada and Mexico would be allowed to expire, a decision that is likely to further exacerbate trade tensions and trigger retaliatory measures.
Commerce Secretary Wilbur Ross told reporters on a telephone briefing on Thursday that a 25 per cent tariff on steel imports and a 10 per cent tariff on aluminium imports from the EU, Canada and Mexico would go into effect at midnight on Friday.
"We look forward to continued negotiations, both with Canada and Mexico on the one hand and with the European Commission on the other hand, because there are other issues that we also need to get resolved," he said.
Ross told reporters that talks with Canada and Mexico over revising the North American Free Trade Agreement (NAFTA) were "taking longer than we had hoped."
Talks with Europe had "made some progress" but not enough for additional exemptions, he said in a conference call from Paris.
'Bad day for world trade'
European Commission President Jean Claude-Juncker responded to the announcement, saying the EU will impose countermeasures on the US.
"This is a bad day for world trade," Juncker said in a speech in Brussels.
"So, we will immediately introduce a settlement dispute with the WTO [World Trade Organisation] and will announce counterbalancing measures in the coming hours," he added.
"It is totally unacceptable that a country is imposing unilateral measures when it comes to world trade."
Mexico retaliated with "equivalent" measures on the farm and industrial products, targeting pork legs, apples, grapes and cheeses as well as steel.
Economy Minister Ildefonso Guajardo said the tit-for-tat measures would complicate talks between the United States, Canada and Mexico to revamp the North American Free Trade Agreement (NAFTA) that underpins trade between the neighbours.
Wall Street slips
The S&P 500 packaged foods and meats index dipped 2.3 per cent with all its 10 components in the red. Kraft Heinz and Mondelez were the biggest lags on the index.
The S&P Composite 1500 Steel index rose 0.3 per cent, led by gains in AK Steel and US Steel although it pared early gains after Mexico`s retaliation.
Shares of Boeing slipped 1.3 per cent and Caterpillar declined 1.9 per cent, dragging down the Dow Jones Industrials.
"The market is worried about retaliation, they are looking for what would come from the EU side," said Zhiwei Ren, managing director and portfolio manager at Penn Mutual Asset Management in Horsham, Pennsylvania.
"But this is another negotiation tactic on the U.S. side and they want to use tariffs as a bargaining tool for other negotiations."
(With inputs from Agencies)