GOTHENBURG, Sweden -- The European Union is making good on its threats to retaliate against U.S. tariffs, moving to impose penalties on $3.2 billion of U.S. products made by President Donald Trump's political base, like bourbon, motorcycles and orange juice.
The European counterattack, a response to the administration's measures on steel and aluminum imports, went into effect Thursday and adds another front to a trade war that has engulfed allies and adversaries around the world. China and Mexico have already struck back with their own tariffs, and Canada, Japan and Turkey are readying similar offensives.
The risk of escalation is high because Trump has promised even more tariffs. Taking aim at German car manufacturers, the president has started an investigation into automobile imports to determine whether they pose a national security concern, the same justification as he used for the metal tariffs.
"You look at the European Union," the president told a crowd Wednesday in Duluth, Minn. "They put up barriers so that we can't sell our farm products in. And yet they sell Mercedes and BMW and the cars come in by the millions. And we hardly tax them at all."
The United States is fighting from a position of strength, with the U.S. economy on track for one of its strongest years in a decade. Europe doesn't have the same defenses. Growth in the region is slowing, and that weakness has been compounded by political turmoil in Italy and Germany, as well as Britain's decision to leave the European Union.
And the highest-stakes fight still looms: In two weeks, the United States is to start taxing $34 billion in Chinese goods. Beijing has vowed to immediately retaliate with its own tariffs on U.S. soybeans and other farm products in a direct shot at Trump's supporters in America's heartland.
[FULL LIST: Chinese products that will be subject to additional tariffs + more products under review]
The conflict between the United States and China -- the world's two largest economies -- is poised to escalate from there. The rhetoric is already intensifying.
Trump said he would then retaliate against any counterpunch from Beijing by targeting an additional $200 billion in Chinese products, and then yet another $200 billion if China refused to back down. All told, the $450 billion in potential tariffs would cover nearly 90 percent of goods China sends to the United States.
The tariffs and threats have begun to take a toll. Steel and aluminum prices, for example, have shot up and supplies have become scarce.
"We oppose the act of extreme pressure and blackmail by swinging the big stick of trade protectionism," a spokesman for China's Commerce Ministry said Thursday. "The U.S. is abusing the tariff methods and starting trade wars all around the world."
Although Trump has sought to exert pressure on other countries, the global nature of supply chains means the retaliatory tariffs are ricocheting in unexpected ways and may ultimately cost jobs in the United States. Sales of Mercedes SUVs, made in Alabama by the German automaker Daimler, will most likely be hit by the U.S. trade dispute with China. The Swedish manufacturer Volvo faces rising prices on the imported steel it uses at its Mack Truck factory outside Allentown, Pa.
John Murphy, a senior vice president at the U.S. Chamber of Commerce, estimates that $75 billion in U.S. products will be subject to new foreign tariffs by the end of the first week of July.
The path to reconciliation is shrouded in uncertainty, creating the potential for broader strain in the global economy. While the Trump administration has sought to use economic force to exert concessions, the successive drumbeat of attacks has left little time to negotiate. Formal trade talks between Brussels and Washington have broken down, although informal channels have remained open.
The European Commission, the bloc's administrative arm, applied its sanctions more than a week earlier than expected, in what analysts said was a show of strength. "It's a signal that the EU is striking back and taking this seriously," said Holger Schmieding, chief economist at Berenberg Bank in London.
The new slate of European tariffs focuses on products that tend to be manufactured in Republican strongholds: whiskey and playing cards from Kentucky, recreational boats from Florida, soybeans and rice from Arkansas.
But trade wars don't play out that neatly. It's not easy to strike precise targets without collateral damage. Take the Mack Truck factory in Pennsylvania. Mack may be a quintessential American brand, but it's owned by Volvo Group, which is based in Gothenburg, the seaport on Sweden's southeastern coast.
The Mack plant uses specially treated steel imported from Europe. American substitutes are not readily available if at all. That means the Allentown factory has to pay 25 percent more for some kinds of steel, putting it at a disadvantage with its competitors who manufacture in Mexico and can get the same high-quality steel without paying the Trump tariffs. At least for the moment, vehicles made in Mexico are not subject to tariffs when they are imported into the United States.
Information for this article was contributed by Jack Ewing of The New York Times and by Paul Wiseman of The Associated Press.
Business on 06/22/2018