At G-20, E.U. warns of trade war if Trump imposes restrictions on steel

HAMBURG — Leaders of the European Union warned sharply on Friday that President Trump risks a trade war if he imposes restrictions on steel imports, a mark of deep divisions as a summit of leaders of major world economies got underway.

In one of the most consequential decisions of his young administration, Trump could within days impose new restrictions, a decision that could impact trade with more than a dozen major countries.

“We will respond with countermeasures if need be, hoping that this is not actually necessary,” European Commission President Jean-Claude Juncker told reporters ahead of meetings in Hamburg of the Group of 20 world economies.

“We are prepared to take up arms if need be,” Juncker said, warning that Europe would respond in days, not months, if Trump announces the restrictions.

German Chancellor Angela Merkel, speaking before a meeting with the other leaders about trade and economic growth, called on everyone to work together to hash out compromises instead of digging in on differences.

U.S. and Russian presidents meet for the first time on the sidelines of the G-20 summit in Hamburg on July 7. (Reuters)
“We are all familiar with the great global challenges,” Merkel said. “We all know that time is of the essence and pressing solutions can only be found if we are ready to strike a compromise, if we accommodate each other’s views without bending over backward too much and giving up principles.”

The comments were a remarkable display of disharmony at the beginning of the meeting and a reflection of how European officials have become more comfortable challenging Trump’s foreign policy stances. Typically, officials at G-20 summits work hard to coalesce around an agreement — even a tepid one — but the meeting so far has exposed numerous divisions between countries on climate, national security and economic policy.

Commerce Secretary Wilbur Ross is near completion of a multi-month review of U.S. steel imports, and he has said that the large amount of steel imported by the United States puts national security at risk because it has weakened the domestic steel industry. The White House is considering using this rationale to impose new restrictions, either by imposing tariffs, quotas or a combination of the two.

Ahead of the summit, the White House was close to making a decision, but top Trump administration advisers slowed the process down at the last minute, persuading Trump to meet with other world leaders at the G-20 before deciding how to proceed.

The Trump administration has blamed China for what it says is a “global overcapacity” of steel, essentially arguing that the Chinese government is subsidizing the steel industry and allowing its producers to create and export so much steel that it drives down prices and makes it difficult for U.S. producers to compete.

But any U.S. restriction on steel imports would have a relatively muted effect on China, and would hit other countries much harder.

The largest exporters of steel to the United States are Canada, Brazil, South Korea, Mexico and Turkey, according to IHS Global Trade Atlas. Germany also has a large steel industry, and German officials have been particularly concerned about what a unilateral move to impose restrictions on steel imports to the United States might mean.

President Trump signed a memo on April 20, to launch a national security investigation into steel imports. "Steel is critical to both our economy and our military," Trump said while surrounded by steel industry executives. (The Washington Post)
Trump and Merkel spoke about trade and steel a few days ago, a reflection of how seriously both sides consider any new action on the issue.

In a Twitter post on Friday, Trump wrote of the G-20 that “I will represent our country well and fight for its interests! Fake News Media will never cover me accurately but who cares!”

As he entered the meetings Friday morning, he strode up to Merkel, smiling, then shook her hand vigorously. Walking away, he looked toward reporters and pumped his fist in the air.

The White House’s National Economic Council has changed the Trump administration’s approach to steel in the past week, people familiar with the strategy said. They are hoping to galvanize other countries at the G-20 to work together to confront China over its government support for the domestic steel industry, with the idea that joint pressure could be more effective and remove the possibility that the United States has to move alone.

It is unclear, though, whether that approach will be effective. E.U. officials on Friday emphasized their commitment to free trade and open borders.

“It’s up to us to avoid such things as protectionism, this very simple thing. That would be wrong,” Juncker said.

The European Union has pointed proudly at a wide-ranging trade deal with Japan, concluded just Thursday, as a retort to Trump’s protectionist inclinations. Juncker said Europe expects to increase its exports to Japan by a third after trade barriers drop away.

One senior European official said there were wide areas of disagreement as leaders headed into their first joint meetings on Friday. At summits such as the G-20, negotiators hammer out a final statement that is supposed to distill consensus and set policy directions for the many countries and organizations that have come together.

But at this summit, the official said, “there are lots of blank spots” in the drafts of the final statement — “and not on the easy topics.” The official spoke on condition of anonymity to discuss the sensitive deliberations.

Merkel “certainly will have to use all of her diplomatic skill to make headway on these difficult questions,” Juncker said.

Thursday evening, German Foreign Minister Sigmar Gabriel sounded a warning on the U.S. approach to trade issues.

“The question is whether the Americans are still convinced that world trade always needs to be assessed according to one question, namely whether the U.S. is the winner, or whether we’ll manage to convince the Americans that when everyone plays by the same fair rules, everyone will be better off,” he told German broadcaster ARD after meeting with Trump alongside Merkel.

After Friday’s meetings, the lower-level negotiators are poised to gather at 11 p.m. and hammer out details through the night. There are also wide differences on climate change, migration and the value of global cooperation.

Another E.U. leader, European Council President Donald Tusk, said he was heartened by Trump’s words of support for Western organizations such as NATO during his Thursday visit to Warsaw. But he was cautious about whether the American outlook had actually changed after months of strain between Washington and Europe.

“We have been waiting for a long time to hear these words from President Trump,” Tusk said. “But the real question is whether it was a one-time incident or a new policy. President Trump said yesterday in Warsaw that words are easy but it is actions that matter. And the first test will be our meeting here in Hamburg.”