The world’s big steel and aluminium-exporting countries are grappling with one of the more intractable puzzles in trade policy: how do you deal with a fundamentally illogical hegemon?
Donald Trump’s announcement of emergency tariffs on steel and aluminium has put the likes of the EU, Japan, Canada, Mexico and Brazil into a quandary. The duties will come in next week, and in the meantime the EU and others are formulating their reaction.
Their responses so far have largely been drawn from the traditional playbook: attempt to negotiate exclusions from the tariffs (successfully, so far, for Canada, Mexico and Australia) or hit back with tariffs of their own in politically sensitive areas (the EU’s current plans). But the risks of these moves going legally astray or setting off a major trade war are much higher than in earlier decades. Affected countries should be planning (as well or instead) to keep the trading system open and functioning between themselves.