EU lands 25% counter tariff punch on US, Trump pauses broad import levy hike – China excepted

Middle Kingdom gets 145%. So this is what it's like living in reality TV

World War Fee The EU voted Wednesday to introduce 25 percent import tariffs on American goods, with the first duties being collected from European consumers on April 15.

Bear in mind this action is a response to US President Donald Trump's earlier steel tariffs, and not the April 2 "tariff liberation day" duty hike.

And demonstrating how fast moving this political situation continues to be, amid a stock market meltdown, in the past few minutes President Trump paused the broad US import tariff increases he promised to bring in this week.

The retaliatory rises, specifically, will be held off for at least some or all countries for 90 days, and he vowed to lower the increase to 10 percent for those nations.

China is the exception, and faces a tariff increase to 145 percent right now, over a "lack of respect" shown by Beijing. The Chinese had hours earlier whacked an 84 percent retaliatory tariff on US goods entering China in response to previous import tax increases promised by the US on goods from the Middle Kingdom. China has also restricted the export of vital rare earth minerals.

Here's the timeline as it appears to us, regarding Beijing and Washington, since President Trump started his second term in January:

1. After threatening on the campaign trail to impose taxes on products imported into the US, on April 2, Trump announced broad 10 percent tariffs, and further retaliatory tariffs on certain countries soon after. China was at that point facing an extra 54 percent: 34 plus a base 20.
2. China hit back within days, promising 34 percent tariff on American goods coming into the Middle Kingdom, as well as a clampdown on its export of rare earth minerals, used in magnets, nuclear reactors, and more.
3. Trump on Monday upped the tariff on Chinese stuff to 104 percent.
4. China today said it will go to 84 percent.
5. Now America has gone to 125 percent, plus the 20 percent base, making it 145 total.

Earlier today, the European Commission said: "The EU considers US tariffs unjustified and damaging, causing economic harm to both sides, as well as the global economy," adding: "These countermeasures can be suspended at any time, should the US agree to a fair and balanced negotiated outcome."

The result is a 25 percent import tax on a range of US products into the EU, including steel and aluminum, almonds, poultry, soybeans, tobacco, and, er, yachts. This follows the US putting levies on European aluminum and steel coming into the States on March 12.

The EU is meanwhile deeply worried it will become a dumping ground for Chinese gear that would have been shipped to the United States and instead will soon flood Europe, affecting Euro businesses. EC President Ursula von der Leyen spoke with Chinese Premier Li Qiang last night, where she emphasized China's critical role in "addressing possible trade diversion caused by tariffs, especially in sectors already affected by global overcapacity."

Li and Von der Leyen also talked about setting up a mechanism for tracking "possible trade diversion" and "ensuring any developments are duly addressed."

I have a trade deficit with my grocer, a trade surplus with my employer. I am not sure it would be a great idea for me to work for my grocer

As far as the American buyer is concerned, a trade war with Beijing is an act of self-harm as the US imports some $525 billion in manufactured goods from China, and the average buyer is going to pay the price on a massive range of products that America does not and cannot manufacture anywhere nearly as cheaply and quickly at home.

It has been only a week since Trump's administration decided to levy duties based on a back-of-the-envelope sum dividing the target country's trade deficit with the US by the country's exports to America. In the EU's case, this was 39 percent, which the president then cut in half to 20 percent "to be kind." He said at the time: "You know, you think of the European Union, very friendly. They rip us off. It's so sad to see. It's so pathetic."

Economists have pointed out that the White House's trade deficit math is a weird way to approach the issue, given that shortfalls in the value of goods traded between countries are created for many reasons that have nothing to do with fairness or trickery.

As Olivier Blanchard, a senior fellow at the Peterson Institute for International Economics noted: "Running bilateral trade surpluses/deficits with different countries is the way it should be. Trying to eliminate each one is simply stupid. I have a trade deficit with my grocer, a trade surplus with my employer. I am not sure it would be a great idea for me to work for my grocer. Even if the loss for the economics profession was minimal, I am not very good at packing groceries."

Therein lies the rub for the US. Just yesterday an American keyboard maker explained it had neither the volume nor capital to open its own stateside factory. One of the advantages of living in a rich nation like the US is the purchasing power to outsource manufacturing and labor abroad, and like many others, among them tech giant Apple, it relies on contract manufacturing. Keyboardio wrote in an open letter: "Most of our electrical components are made in China. Sometimes we'll use or consider components not made in China – and they're made in Japan, Taiwan, or Germany. The USA doesn't make the components we need."

The USA doesn't make the components we need

Americans are not, right now at least, interested in working in factories for low pay to compete with the rest of the world, and we're not sure they want the pollution that comes with that, either. It will also take years and years to scale up a manufacturing base needed to churn out goods that imported would be taxed into an effective trade embargo. In the meantime, folks in the States will have to pay more for stuff as companies even wonder if it's worth investing in the country, the one with the global reserve currency and an economy the envy of the world, after it has lost its way so fast and so deeply.

The US stock market, hammered since the tariff war kicked into gear, is spiking today on the news that Trump has paused the fight for now. Just before his announcement of the 90-day suspension of the retaliatory tariffs, the President wrote on social media: "This is a great time to buy." Hint, hint.

As for Europe, it is considering countermeasures other than a mere like-for-like tariff hike that would set off a similar ratchet action to the one being experienced by China and the US. The tech services countermeasures The Reg wrote about earlier this week are a planned part of its response to the April 2 "liberation" tariffs - and lay bare the problem of deficit math that Trump has been playing.

The member state bloc is a net exporter of goods to the US – and some of the gripes about not taking in many of the same type of American goods are well-founded. American automobiles are wider and heavier than many Europe's twisty cobbled streets can handle (also gasoline costs more on the continent and many US cars don't bother with fuel efficiency because gas is relatively inexpensive), and chlorine-washed chicken has been banned in the both the EU and the UK since the late nineties.

But it is most certainly a net importer of US services – including those of AWS, Microsoft and the like – something it's hoping to use as leverage in a trade dispute. But that's assuming that the tech giants have a lot more sway with the administration than even Trump's eminence grease Elon Musk has...

We'll find out next week. Or day. Or hour. ®

Updated to add on April 10

President Von der Leyen put the EU's own plans on pause this morning, telling reporters: "We took note of the announcement by President Trump. We want to give negotiations a chance. While finalizing the adoption of the EU countermeasures that saw strong support from our Member States, we will put them on hold for 90 days.

"If negotiations are not satisfactory, our countermeasures will kick in. Preparatory work on further countermeasures continues. As I have said before, all options remain on the table."

Also, the White House clarified the total tariff on China is 145 percent, 125 percent plus an existing base of 20.