WASHINGTON -- President Donald Trump revved up his global trade war on two fronts Monday, announcing tariffs on industrial metals from Brazil and Argentina while threatening tariffs of up to 100% on dozens of popular French products.
The administration said the moves were necessary because U.S. trading partners were acting unfairly to disadvantage both the country's traditional economic pillars as well as its best hopes for future prosperity.
In a pre-dawn tweet, Trump said he was imposing tariffs on steel and aluminum from Brazil and Argentina to counter what he called a "massive devaluation of their currencies" at the expense of American farmers. The unexpected announcement upends the South American countries' 2018 agreement with Trump to accept quotas on their shipments to the U.S. in place of the import taxes.
Hours later, Robert Lighthizer, the president's chief trade negotiator, released the results of a five-month investigation that concluded a French digital services tax discriminated against American internet companies and should be met with tariffs of up to 100% on $2.4 billion in products such as cheese, yogurt, sparkling wine and makeup. The proposal threatens to intensify simmering trans-Atlantic trade friction, coming with Trump already accusing European automakers of enjoying government protection from American competition.
The French tax "discriminates against U.S. companies, is inconsistent with prevailing principles of international tax policy, and is unusually burdensome for affected U.S. companies," Lighthizer said in a statement.
The agency will accept public comment on the plan through Jan. 6 and hold a hearing Jan. 7.
Fallout from the president's renewed embrace of tariffs could cloud prospects for future or ongoing talks with countries in Asia and Europe.
"It ought to make a whole lot of people nervous," said William Reinsch of the Center for Strategic and International Studies. "It kinda makes people wonder what's the point of negotiating if this is going to happen."
The administration's action against France is designed to create leverage for just such a negotiation. At issue is a 3% tax France introduced last year, which the administration says would unfairly target the American stars of the digital economy.
The U.S. move is a setback for efforts to stop a conflict over digital tax from intensifying. Trump and France's Emmanuel Macron agreed in August to try to find a compromise, but a 90-day deadline for talks expired last week without a resolution.
French lawmakers call the levy "Les GAFA" -- an acronym for Google, Amazon, Facebook and Apple, companies that French officials accuse of paying insufficient taxes on revenue earned in France.
Administration officials worry the French tax could set a precedent for other countries. Lighthizer said he may open investigations into similar taxes in Austria, Italy and Turkey.
Industry groups welcomed the recommendation with some, such as the Information Industry Technology Council, calling for both countries to work out a "lasting tax policy resolution" at the Organization for Economic Co-operation and Development.
"Today USTR is defending the Internet, which is a great American export," said a statement from the Internet Association, an industry group.
In a sign of how abruptly Trump had acted, his own administration was unprepared to provide details.
The White House referred questions about the new policy to the Commerce Department, which referred a reporter back to the White House. Officials at the Customs and Border Protection agency, which collects tariffs from importers, referred a reporter to Lighthizer's office, which did not respond to a request for comment.
Apart from the specifics of Monday's order, Trump's tweets amounted to a robust defense of his use of import taxes.
"U.S. Markets are up as much as 21% since the announcement of Tariffs on 3/1/2018," Trump wrote in an apparent reference to the technology-heavy NASDAQ index. "And the U.S. is taking in massive amounts of money (and giving some to our farmers, who have been targeted by China)!"
Trump's action against Brazil and Argentina took officials in both countries by surprise. Typically, the U.S. provides businesses with some warning of tariff changes, delaying their effective date to allow goods in transit to arrive at American ports without being taxed. But the president tweeted that his tariff order was "effective immediately.
"Aluminum?" Brazilian President Jair Bolsonaro asked when reporters presented him with Trump's tweet. "If that's the case, I'll call Trump. I have an open channel with him."
Dante Sica, Argentina's minister of production, called the move "completely unexpected."
"I was in Washington last week, and I talked to a lot of people, and there was no sign whatsoever that there would be any kind of change," he said.
In March 2018, Trump authorized a 25% tariff on all steel imports and a 10% duty on aluminum -- import barriers that heralded the start of his administration's hawkish push on trade -- after a government report found that foreign shipments of the metals imperil national-security interests.
In August last year, he gave South Korea, Brazil and Argentina targeted relief from quotas imposed on inbound steel shipments to protect U.S. producers. The move allowed buyers to request exemptions for imports from key suppliers.
Brazil's economy over the past year has barely grown, advancing at an annual rate of just 0.2%. The Brazilian central bank has cut interest rates three times since August in a bid to jump-start growth. As a consequence, the Brazilian currency, the real, has fallen about 8% against the dollar this year.
Argentina, meanwhile, is mired in a financial crisis that has left its economy smaller today than it was four years ago and resulted in a humiliating rescue from the International Monetary Fund. As investors fled, the currency this year lost 37% of its value. The Argentine central bank has raised its main interest rate to 63% in a bid to halt the decline.
"Everybody is moving their money out of Argentina," said Desmond Lachman, an economist at the American Enterprise Institute and a former fund official. "I'm not sure what he wants the government to do."
There is no evidence that either country's currency moves are designed to gain an unfair trade edge, according to economists and financial market experts. "These things are signs of a very sick patient, not signs of a robust economy," said Marc Chandler, chief market strategist for Bannockburn Global Forex. "The whole region is on fire."
Brazil's $4.9 billion in exports to the U.S. over the past two months were almost 2% lower than during the same period in 2018.
Trump also renewed his assault on the Federal Reserve on Monday, tweeting that it "should likewise act so that countries, of which there are many, no longer take advantage of our strong dollar by further devaluing their currencies."
Falling currencies abroad act like a price increase on American exports. "This makes it very hard for our manufactures & farmers to fairly export their goods. Lower Rates & Loosen -- Fed!," the president tweeted.
For months, the Fed has been the target of the president's ire for raising interest rates as the economy strengthened. But Fed Chairman Jerome Powell reversed course at the end of July citing the effects of the trade war on business confidence and investment.
Information for this article was contributed by Rachel Siegel, Terrence McCoy, David Nakamura, Jeanne Whalen, Heloisa Traiano of The Washington Post; by Brendan Murray, Joe Deaux, William Horobin, Jenny Leonard and Laura Davison of Bloomberg News; by Paul Wiseman of The Associated Press; and by Ana Swanson of The New York Times.
A Section on 12/03/2019
Print Headline: U.S. targets Argentina, Brazil, France on trade