US President Donald Trump’s new tariffs targeting steel and aluminium imports by 25 and 10 per cent were anticipated by UAE’s aluminium companies but could have adverse effects on America’s own auto industry.
While the UAE is a major aluminium exporter to the US, industry insiders have suggested they are“ well prepared” for the hike. Close watchers have also said the government is to hold talks in Washington to help mitigate the impact.
Mr Trump’s tariffs, announced on Thursday and expected to take effect on March 24, “will not trigger a crisis or an explosion in the US-UAE relationship”, said Danny Sebright, President of the US-UAE Business Council.
Mr Sebright, who just returned from Abu Dhabi, told The National: "My view is that the UAE will meet quietly with its US interlocutors to determine how best to mitigate the worst effects of these tariffs on its industry. They will try determine if they can win an exemption."
Both Canada and Mexico, currently renegotiating with the US the terms of the NAFTA agreement, gained an exemption from the new tariffs. Mr Trump opened the door for “any country with which we have a security relationship” to explore “alternative ways” to avoid the new tariffs.
The UAE is the third largest aluminium exporter to the United States, and one of its major companies, the Emirates Global Aluminium (EGA), indicated in a press release earlier this week, that it is “well prepared” for the US levies.
Mr Sebright saw an edge for the UAE in maintaining its aluminium exports to the US or even negotiating an exemption. “The UAE’s superior aluminium product is in high demand for US aerospace and defence products,” he said, and close bilateral ties will help initiate “quiet dialogue on the commerce and diplomatic levels to mitigate this".
More broadly, Mr Trump’s tariffs fulfil a campaign promise for his base, and “could bring back some steel production and jobs, but that depends on many factors,” said Benn Steil, a senior fellow and director of international economics at the Council on Foreign Relations (CFR). Those factors include “the ultimate level of the tariffs and how widespread the exemptions ultimately are, as well as how much damage it does to demand in steel-using industries.”
Mr Steil, speaking to The National, warned that the levies could have an "extremely detrimental effect on steel-using industries in the United States, such as automobiles". His study, published by CFR, calculated "potential job loss in the US auto industry at up to 40,000 by 2019 if steel tariffs were set at 25% with no exemptions." If it precipitates a trade war, "the effects could obviously be much more widespread and damaging."
The expert, a world-known economist and author of the recent book “The Marshall Plan: Dawn of The Cold War”, said Canada and Mexico were exempt because “together they represent over a quarter of US steel imports”. He did not expect a dramatic reaction from China, but perceived the tariffs as a harbinger for more protectionist and anti-trade policies to come from the Trump team.
With the resignation of Mr Trump’s chief economic adviser and pro-trade figure Gary Cohn this week, “there is now one less powerful voice for restraint" around the US President. Instead, more isolationist voices on trade such as Peter Navarro, Director of the White House National Trade Council, are making a comeback around Mr Trump, explained Mr Steil.
While senior Republicans in Congress have publicly opposed Mr Trump’s tariffs, the lawmakers would need a veto proof majority to override them.
Still, Mr Trump’s tariffs are not new. In 2002, former President George W Bush also imposed levies on certain steel products but then revoked them after 21 months.