Trump authorizes tariffs but exempts Canada and Mexico

President Donald Trump pressed ahead with the imposition of 25 percent tariffs on steel imports and 10 percent for aluminum on Thursday but exempted Canada and Mexico, backtracking from earlier pledges of tariffs on all countries. Canada is the biggest exporter of steel to the U.S., and all three countries share a complex automotive manufacturing infrastructure.

Describing the dumping of steel and aluminum in the United States as "an assault on our country," Trump told a news conference that the best outcome would for companies to move here and insisted that domestic production was needed for national security reasons.

"If you don't want to pay tax, bring your plant to the USA," he said.

Details of the plan came from a briefing by administration officials ahead of Trump's speech. Other countries can apply for exemptions, according to the administration, although details of when they would be granted were thin.

Trump has 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 the North American Free Trade Agreement (NAFTA), which appear to have stalled.

Trump has also demanded concessions from the European Union, complaining that it treated American cars unfairly and has threatened to hike tariffs on auto imports from Europe.

U.S. stocks extended gains ahead of the announcement, as the Associated Press reported key details. The benchmark Standard & Poor's 500 index was last up 0.3 percent, but the S&P composite 1500 steel index was down 2.7 percent.

U.S. Treasury bonds yields rose slightly, with the yield on the benchmark 10-year Treasury note at 2.86 percent. The Canadian dollar and Mexican peso gained against the U.S. dollar.

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 a campaign by legislators from his own Republican party, industry groups and U.S. allies abroad.

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

"If Donald Trump puts in place the measures this evening, we have a whole arsenal at our disposal with which to respond," European Financial Affairs Commissioner Pierre Moscovici said.

Countermeasures would include European tariffs on U.S. oranges, tobacco and bourbon, he said. Harley Davidson motorcycles have also been mentioned, targeting House of Representatives Speaker Paul Ryan's home state of Wisconsin.

Ryan said on Thursday the United States should initiate "surgical" actions against China to stop it from dumping steel and aluminum instead of Trump's broader tariff plan.

Noting that the United States should focus on China's metals sales that are "trans-shipped" through other countries at unfair prices, Ryan said: "I really think the best policy is to be surgical and specific."

Speaking to employees of Home Depot in Atlanta, Ryan, a Republican, added: "I'm just not a fan of broad-based, across-the-board tariffs because I think you'll have a lot of unintended consequences. You'll have a lot of collateral damage."

Over in the Senate, Republican Majority Leader Mitch McConnell said, "Members of the Senate, myself included, are concerned about the scope of the proposed tariffs on steel and aluminum and their impact on American citizens and businesses."

Republican Sen. Jeff Flake, an Arizona conservative who has frequently feuded with Trump, said the president's "so-called 'flexible tariffs'" — his stated intention to change the tariff rates and targets as he sees fit — "are a marriage of two lethal poisons to economic growth — protectionism and uncertainty .... Congress cannot be complicit as the administration courts economic disaster."

Flake said he would introduce legislation to nullify the tariffs.

China reacts
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.

Both Guajardo and Champagne were speaking to Reuters on the sidelines of the signing ceremony in Santiago.

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.

Beijing, which until now had kept largely silent on the issue, sharpened its rhetoric significantly. One lever that China has is U.S. agricultural exports and it has said in the past that it could target soybeans.

"Especially given today's globalization, choosing a trade war is a mistaken prescription. The outcome will only be harmful," Foreign Minister Wang Yi said on the sidelines of an annual meeting of China's parliament. "China would have to make a justified and necessary response."

China had a record $375.2 billion goods surplus with the United States last year.

Trade tensions between the world's two largest economies have risen since Trump took office, and although China accounts for only a small fraction of U.S. steel imports, its massive industrial expansion has helped create a global glut of steel that has driven down prices.

Most economists and trade specialists say they doubt the steel and aluminum tariffs alone would trigger a global trade war, but point to the risk of further U.S. measures against China as a major tipping point.

Trump has also threatened to impose hefty tariffs on European car exports if the EU does take retaliatory measures.