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Financial Times / Biz - Money

Trump softens stance on tariffs ahead of rollout

President Donald Trump said he was willing to carve out exceptions to new steel and aluminium tariffs for “real friends” of the US as he prepared to sign the sweeping levies. 

In a morning tweet Mr Trump said he was looking forward to a ceremony in Washington on Thursday afternoon at which he is expected to sign a proclamation imposing tariffs of 25 per cent on steel imports and 10 per cent on aluminium. 

He also indicated that he had softened his vow to apply the tariffs to all countries after concerns from Republicans in Congress, US business and his own advisers that the tariffs would hit allies such as Canada, Japan and the EU more than China, the ostensible target. 

“We have to protect & build our Steel and Aluminium Industries while at the same time showing great flexibility and co-operation toward those that are real friends and treat us fairly on both trade and the military,” Mr Trump said. 

The president’s tariff plan brought a sharp rebuke on Thursday from Mario Draghi, the European Central Bank president. Mr Draghi warned that rising protectionism was a threat to growth in Europe adding that “unilateral decisions are dangerous”.

“If you put tariffs against your allies you wonder who your enemies are,” Mr Draghi said. 

China’s foreign minister, Wang Yi, said any action aimed at Beijing would result in “a justified and necessary response”. He also warned that a cascade of trade protectionism risked hurting the global economy, and ultimately the US as well. 

“A trade war is never the right solution,” Mr Wang told reporters during the annual session of the National People’s Congress, China’s rubber-stamp legislature. “The outcome will only be harmful to everyone.” 

Mr Trump’s aides were racing to finalise the details of the proposed tariffs. Administration officials on Wednesday had said Canada, Mexico and possibly European allies could be excluded from any tariffs, but did not elaborate on how that would work.

In a report last month the US Commerce Department said any exceptions for countries or companies could lead to higher tariffs. It proposed another option for a 53 per cent tariff on steel from China and 11 other countries alongside quotas limiting other imports to 2017 levels. 

But since his off-the-cuff announcement of the tariffs last week Mr Trump has stuck firm to the 25 per cent and 10 per cent figures and the need for broad tariffs. Republicans in Congress have urged the president to take a more surgical approach to tackling the problem of China’s flooding of global markets with cheap steel. They also have expressed concerns that the new tariffs would amount to a tax hike on US businesses and consumers just as they were celebrating a victory in passing last year’s tax reforms. 

“We support your resolve to address distortions caused by China’s unfair practices, and we are committed to acting with you and our trading partners on meaningful and effective action,” more than 100 Republican members of Congress wrote in a letter to the president late Wednesday.

“But we urge you to reconsider the idea of broad tariffs to avoid unintended negative consequences to the US economy and its workers.” 

Additional reporting by Claire Jones in Frankfurt and Charles Clover in Beijing