Trump will delay the start of possible trade war with some of the US's closest allies

Pool/Getty ImagesPresident Donald Trump

  • President Donald Trump announced extensions to steel and aluminium tariff exemptions for six key US allies on Monday.
  • The move will allow the US and the allies, including the European Union and Canada, more time to work out ways to reduce trade imbalances.
  • Trump’s extensions also likely delay the start of a trade war with those countries granted exemptions.

President Donald Trump’s administration announced Monday that it would extend exemptions to steel and aluminium tariffs for some of the US’s closest allies, avoiding the start of a possible trade war.

Trump decided to postpone imposing the tariffs and extend exemptions that will allow the countries to continue exporting metals to the US without being subject to a 25% tariff on steel and 10% tariff on aluminium.

The exemptions will now last until June 1, a move that gives the US and the exempted nations more time to work out deals to help reduce trade imbalances.

Trump originally did not plan to exempt any countries when the tariffs were first announced. But similar to his other moves on trade, Trump backed down on the threat. A half-dozen allies were eventually granted a temporary exemption: Argentina, Australia, Brazil, the European Union, Canada, and Mexico.

According to a statement from the administration, the exemptions for Canada, Mexico, and the EU will be extended for a “final 30 days” as negotiations continue with those countries. The US is seeking quotas, or a set limit on the amount of imports, in exchange for a permanent exemption.

“In all of these negotiations, the Administration is focused on quotas that will restrain imports, prevent transshipment, and protect the national security,” the administration said in a statement.

The administration also said that “agreements in principle” to permanently exempt Argentina, Australia, and Brazil were reached, but additional time was needed to hash out the details.

As part of the agreement, South Korea secured a permanent exemption from the tariffs in exchange for an annual quota on Korean metal exports to the US.

The exemptions are significant because the countries represent a large percentage of imported steel and aluminium. Five of the top 10 steel exporters to the US were provided exemptions and two exempted countries, Canada and Argentina, make up 55% of all aluminium imported by the US.

In addition to the direct economic consequence of the exemptions, the move also prevents those countries from taking retaliatory action against the US.

French President Emmanuel Macron and German Chancellor Angela Merkel were in Washington, DC, to meet with Trump last week, and both stressed the need to keep open the trade channels between the EU and the US. But, in the event that Trump did not grant extensions, the EU threatened to impose tariffs on the US.

In a statement to Business Insider, a UK government spokesperson said the country was encouraged by the exemption extension but was concerned about possible economic distortions caused by the tariffs.

“It is positive that the UK has been granted a further exemption to these tariffs. We will continue to work closely with our EU partners and the US government to achieve a permanent exemption, ensuring our important steel and aluminium industries are safeguarded,” the spokesperson said.

“We remain concerned about the impact of these tariffs on global trade and will continue to work with the EU on a multilateral solution to the global problem of overcapacity, as well as to manage the impact on domestic markets.”

For now, these actions, and a probable trade war, are likely to be delayed by Trump’s extension.

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