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Trade War: After China, Trump Could Focus on Europe

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Trade war

Prospects of a global trade war spooked investors last year. In March, President Trump imposed the Section 232 tariffs on US steel and aluminum imports. The tariffs were imposed after the Department of Commerce said that steel and aluminum imports are a threat to US national security. The tariffs were broad-based and covered most countries with a few exemptions. The temporary exemptions for Canada, Mexico, and the European Union were withdrawn.

While President Trump lashed out against the European Union (VGK) (VEU) on trade issues, the Trump Administration hasn’t taken any major trade actions against the region apart from the Section 232 steel and aluminum tariffs.

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Auto could be next

The Department of Commerce is also investigating whether automotive imports are a threat to US national security. The deadline for the report is February 17, according to CNBC. While US steel companies welcomed the Section 232 probe into steel imports, US auto companies like Ford (F) and General Motors (GM) weren’t thrilled about the probe. Several other US companies (IBM) (MSFT) including Apple (AAPL), Facebook (FB), Alphabet (GOOG), Walmart (WMT), and Amazon (AMZN) lobbied against the tariffs on China (FXI).

Steel tariffs

President Trump would have 90 days to act on the report. He took action on the Section 232 steel and aluminum tariffs pretty quickly. President Trump imposed a 25% tariff on US steel imports, which was higher than the 24% tariff that the Department of Commerce recommended.

If President Trump imposes automotive tariffs, it could ignite a trade war with the European Union.

Next, we’ll discuss what investors can expect from the US-China trade talks.

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