President Trump revved up his global trade war on two fronts Monday, announcing tariffs on industrial metals from Brazil and Argentina while threatening even harsher penalties on dozens of popular French products.
In a predawn tweet, Trump said he was ordering new 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 Latin American countries’ 2018 agreement with Trump to accept quotas on their shipments to the United States instead of the import taxes.
Hours later, Robert E. 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 percent on $2.4 billion in products such as cheese, yogurt, sparkling wine and makeup. The proposal, which awaits a presidential decision, threatens to intensify simmering transatlantic trade friction, coming with Trump already accusing European carmakers 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.
Speaking early Tuesday, French Finance Minister Bruno Le Maire called the proposed tariffs “unacceptable.”
“This is not the behavior we expect from the United States vis-a-vis one of its principal allies, France, and, in a general manner, Europe,” he said on Radio Classique.
Monday’s protectionist flurry came as the president’s “America First” trade policy remains bogged down at the negotiating table and on Capitol Hill less than a year before the 2020 presidential election.
Even as the president flew to London for a NATO summit, all the essentials of Trumpian policymaking — bold action, debatable economics and sparse details — were on display back in Washington.
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 kind of makes people wonder what’s the point of negotiating if this is going to happen.”
The administration’s action against France may be designed to create leverage for just such a negotiation. At issue is a 3 percent tax France introduced last year, which the administration says would unfairly target America’s digital economy icons.
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. (Amazon founder and chief executive Jeff Bezos owns The Washington Post.) The companies did not immediately respond to a request for comment.
Administration officials worry that the French tax could set a precedent for other countries. Lighthizer said he may open investigations into similar taxes in Austria, Italy and Turkey.
“The whole point of it is to start a negotiation,” said Reinsch, a former Commerce Department official. “Because imposing a penalty doesn’t solve the problem.”
Industry groups welcomed the recommendation with some, such as the Information Technology Industry Council, calling for both countries to work out a “lasting tax policy resolution” at the Organization for Economic Cooperation and Development.
“Today USTR is defending the internet, which is a great American export,” said a statement from the Internet Association, an industry group.
Apart from the specifics of Monday’s order, Trump’s tweets amounted to a robust defense of his unconstrained 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)!”
The president’s enthusiasm for tariffs is not shared by Federal Reserve Chair Jerome H. Powell, who has said they are making executives so uncertain about the outlook that companies are delaying investments and slowing the economy.
Likewise, the $28 billion in tariff revenue that Trump has earmarked for farmers hurt by his trade war is effectively a tax paid by other Americans — and now amounts to more than twice the 2009 bailout of the U.S. auto industry.
Trump’s action against Brazil and Argentina took officials in both countries by surprise. Typically, the United States 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.”
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 U.S. Customs and Border Protection, which collects tariffs from importers, referred a reporter to Lighthizer’s office, which did not respond to a request for comment.
Commerce Secretary Wilbur Ross told Fox Business: “Even our friends must live by the rules. Our best allies must live by the rules. What the president was concerned about was deterioration of the Brazilian currency. That is a fair factor to take into account. It’s a real factor. The lower their currency, the cheaper products coming in. He felt he had to do something about it. They are not the only one where there are currency issues.."
It’s not clear what “rules” the president thinks Brazil or Argentina has violated. Brazil’s economy over the past year has barely grown, advancing at an annual rate of just 0.2 percent. 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 percent this year against the dollar.
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 by the International Monetary Fund. As investors fled, the currency this year lost 37 percent of its value. The Argentine central bank has raised its main interest rate to 63 percent 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 IMF official. “I’m not sure what he wants the government to do.”
David Nakamura, Jeanne Whalen, Tony Romm and Heloisa Traiano in Washington as well as James McAuley in Paris, contributed to this report.
