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The Guardian - UK
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Graeme Wearden (now) and Nick Fletcher

Trump tariffs: IMF pleads against trade war as EU threatens to retaliate - as it happened

The logo for U.S. Steel appears above a trading post on the floor of the New York Stock Exchange today.
The logo for U.S. Steel appears above a trading post on the floor of the New York Stock Exchange today. Photograph: Richard Drew/AP

And finally, here’s our latest news story on the growing fears of a global trade war:

Europe has warned Donald Trump to expect retaliatory strikes against American icons like Harley-Davidson, Levi’s jeans and Kentucky bourbon, if he sparks a trade war by going ahead with punitive US tariffs on foreign steel.

The European commission president, Jean-Claude Juncker, warned there would be consequences for the US if Trump’s threat of a 25% tariff on steel and 10% on aluminium imports takes effect.

“If the Americans impose tariffs on steel and aluminium, then we must treat American products the same way,” Juncker told German television stations.

“We must show that we can also take measures. This cannot be a unilateral transatlantic action by the Americans,” he said. “I’m not saying we have to shoot back, but we must take action.

“We will put tariffs on Harley-Davidson, on bourbon and on blue jeans – Levi’s,” he added.

His warning came as the International Monetary Fund said that Donald Trump’s plan would cause international damage – and also harm America’s own economy.

“The import restrictions announced by the US President are likely to cause damage not only outside the US, but also to the US economy itself, including to its manufacturing and construction sectors, which are major users of aluminium and steel,” the IMF said.

Other world leaders also threatened retaliation. Canadian prime minister, Justin Trudeau, said US tariffs would be “absolutely unacceptable” and China too expressed “grave concern” over the plans.

Meanwhile, the US president breezily asserted that “trade wars are good”.

Here’s the full story:

That’s all for today. Thanks for reading and commenting. GW

Ed Conway of Sky News says the criticism of president Trump’s plans from the IMF is significant:

Marketwatch points out that Donald Trump’s pledge to impose new tariffs went down well with one audience -- the US steel and aluminum producers.

The American Iron and Steel Institute said it was “pleased” with the tariffs announcement, while the Aluminum Association said “we appreciate” the president’s commitment to help the aluminum industry.

Dow closes in the red

Traders on the floor at the New York Stock Exchange today
Traders on the floor at the New York Stock Exchange today Photograph: Andrew Kelly/Reuters

Ding ding goes the Wall Street closing bell.

As traders catch their breath after another busy week, the Dow Jones industrial average is down almost 71 points, or 0.3%, at 24,538.

That’s a recovery on its earlier losses, but also the fourth daily drop in a row.

Big fallers on the Dow included McDonald’s (-4.6%), Caterpillar (-2.3%) and Boeing (-1.1%).

The S&P 500, which contains more companies than the Dow, ended up 0.5%.

Wall Street is staging a late recovery!

In the last few minutes of trading, the Dow is bouncing back from its lows, and the S&P and the Nasdaq are now up for the day....

Here’s a reminder that Canada, Brazil, South Korea and Mexico will take the biggest hit from new steel tariffs:

Gregory Daco of Oxford Economics suggests the new steel tariffs could scupper the hopes of the US rejoining the NAFTA trade bloc:

The Canadian flag

Canada is mulling its own response to the threat of tariffs on its steel and aluminum sales to the US.

As we reported earlier, Canadian PM Justin Trudeau said such a move was “absolutely unacceptable”. A government source has now told Reuters that Ottawa is considering what sanctions it could impose in retaliation.

Canada is taking nothing for granted, the source added -- another sign that a trade war could break out....

With 45 minutes to go, the Dow is down 222 points, or 0.9%, and heading for a weekly loss.

The vice-president of the European Commission, Jyrki Katainen, has warned that Trump’s new tariffs could trigger a global trade war.

Katainen, who is also the former prime minister of Finland, points out that protectionism helped to create the Great Depression of the 1930s.

Within Europe, Germany could take the biggest hit from Trump’s new tariffs. That’s because it’s the biggest EU-based exporter of steel to the US:

EU countries will also worry that steel will be redirected to them, instead of going to America. An influx of extra imports could hurt their domestic industry (although also deliver cheaper prices to consumers)

Business Insider have crunched the latest trade figures to show that Canada would take the biggest hit from the tariffs announced on Thursday:

Just in: The governor of Wisconsin, Scott Walker, has called on Donald Trump to reconsider his decision on steel and aluminum tariffs.

He warns that US companies which use steel could be driven abroad, costing Americans their jobs.

Updated

Traders on the floor of the New York Stock Exchange today
Traders on the floor of the New York Stock Exchange today Photograph: Richard Drew/AP

Here’s our news story on Wilbur Ross’s comments (complete with that tin of soup)....

It’s also emerged today that Carl Icahn, a former special adviser to Donald Trump, sold $31.3m of shares in a company heavily dependent on steel imports last week.

That was good timing by Icahn - as shares in Manitowoc have fallen sharply since the tariffs were announced.

More here:

NBC are reporting that Donald Trump announced his plans for steel and aluminum tariffs without any internal review by government lawyers or his own staff.

Officials are also claiming that the president was ‘gunning for a fight’ when he made the decision.

It came during a tough week at the White House (including son-in-law Jared Kushner having his security clearance downgraded, and communications director Hope Hicks deciding to step down).

NBC says:

According to two officials, Trump’s decision to launch a potential trade war was born out of anger at other simmering issues and the result of a broken internal process that has failed to deliver him consensus views that represent the best advice of his team.

On Wednesday evening, the president became “unglued,” in the words of one official familiar with the president’s state of mind.

A quick market update:

The Dow Jones is still wallowing in the red, and currently down 241 points or 1% at 24,367. That follows those hefty losses in Europe today.

Caterpillar, the construction and machinery giant, has lost 2% while aeroplane maker Boeing is down 1.6%. They’d both suffer from higher metals prices, and a slowdown in global growth.

The broader S&P 500 is slightly down, while the Nasdaq is flat.

IMF: Trade war would hurt all sides

A security personnel stands next to IMF logoA security personnel stands next to International Monetary Fund logo at IMF headquarters in Washington, U.S., April 19, 2017. REUTERS/Yuri Gripas

Newsflash: The International Monetary Fund is pleading with Donald Trump not to trigger a trade war.

As tensions with Europe rise, fast, the IMF is calling on all sides to work together, rather than descend into protectionism. It fears that these new tariffs would hurt the US economy, as well as other countries.

IMF spokesman Gerry Rice says:

“The import restrictions announced by the U.S. President are likely to cause damage not only outside the U.S., but also to the U.S. economy itself, including to its manufacturing and construction sectors, which are major users of aluminum and steel.

We are concerned that the measures proposed by the U.S. will, de facto, expand the circumstances where countries use the national-security rationale to justify broad-based import restrictions.

We encourage the U.S and its trading partners to work constructively together to reduce trade barriers and to resolve trade disagreements without resort to such emergency measures.”

Here’s the full quote from Jean-Claude Juncker, threatening to hit back against America with new tariffs on sales into Europe:

“We will put tariffs on Harley-Davidson, on bourbon and on blue jeans - Levi’s.

“We are here and they will get to know us. We would like a reasonable relationship to the United States, but we cannot simply put our head in the sand.”

The EC president was speaking on German TV (via Reuters).

Updated

Juncker threatens tariffs

Boom!: Europe is threatening to hit back against America, with new tariffs on some famous US names.

Jean-Claude Juncker, head of the European Commission, has told reporters that tariffs could be imposed on Harley-Davidson motor bikes, bourbon whiskey and Levi’s jeans.

That ratchets up the tensions between the two sides.

EC spokewoman Mina Andreeva has tweeted the details:

Duncan Robinson of the Economist says it could hit some consumers hard:

Updated

Wilbur Ross has also confirmed that Trump’s tariffs will be applied globally.

That dashes hopes that UK and other European manufacturers might be exempt, and raises the chances of retaliatory action by the EU.

Speaking on Bloomberg TV, the commerce secretary explained the president’s thinking:

“Of the options that I presented, the president chose one -- which was put broad tariffs on all products from all countries.

“We have to deal with a global problem on a global basis” to stamp out “this recurring phenomenon” of shipments going through other nations to evade tariffs.

Wilbur Ross defends tariffs

President Trump’s commerce secretary, Wilbur Ross, reckons people are over-reacting.

He appeared on CNBC earlier this afternoon, to argue that consumers wouldn’t notice any impact from higher steel and aluminium tariffs.

In a surprising twist, Ross even produced a soup can to back up his case, saying:

“In a can of Campbell’s Soup, there are about 2.6 pennies worth of steel. So if that goes up by 25 percent, that’s about six-tenths of 1 cent on the price on a can of Campbell’s soup.

I just bought this can today at a 7-Eleven ... and it priced at a $1.99. Who in the world is going to be too bothered?”

Only one problem; a Campbell’s spokesperson had earlier warned that new tariffs on imported tin plate steel would indeed push up prices.... More here

Updated

Tariffs "abolutely unacceptable" - Canada's Trudeau

Canadian prime minister Justin Trudeau said US tariffs on steel and aluminium would be “absolutely unacceptable”.

He added that he had made this point directly to Trump, and said his officials would continue to engage with all levels of the US government in the coming days.

European markets close sharply lower, FTSE at 14 month low

The threat of a trade war in the wake of Donald Trump’s plan to impose tariffs on imported steel and aluminium has rattled stock markets, which had already reverted to their volatile ways of a couple of weeks ago.

But Trump is not the only concern for European markets, of course. Investors were also nervous ahead of Sunday’s Italian election and the vote in Germany on the same day by members of the SDP party about whether to join a coalition government.

Meanwhile the FTSE 100 hit its lowest level since December 2016 as, with all the other worries, investors also had Theresa May’s key Brexit speech to deal with. It is safe to say they were not exactly inspired by the prime minister’s words. Dave Madden, market analyst at CMC Markets, said:

We have heard much of it before, and there wasn’t much for traders to latch on to. Mrs May made it clear the UK would like a deal that is geared to its unique needs. The PM once again stated that ‘no deal was better than a bad deal’, which could prove to be costly.

The final scores in Europe showed:

  • The FTSE 100 finished 105.74 points or 1.47% lower at 7069.90
  • Germany’s Dax dropped 2.27% to 11,913.71
  • France’s Cac closed down 2.39% at 5136.58
  • Italy’s FTSE MIB fell 2.39% to 21,912.14
  • Spain’s Ibex ended down 2.13% at 9531.1
  • In Greece, the Athens market lost 2.16% to 813.09

On Wall Street, the Dow Jones Industrial Average is off its worst levels, down 150 points or 0.6%.

Potential for escalation is real - World Trade Organisation

The World Trade Organisation has said a trade war is in no one’s interests.

In a statement WTO director general Roberto Azevedo said:

The WTO is clearly concerned at the announcement of US plans for tariffs on steel and aluminium. The potential for escalation is real, as we have seen from the initial response of others.

A trade war is in no one’s interests. The WTO will be watching the situation very closely.

Roberto Azevedo
Roberto Azevedo Photograph: Daniel Leal-Olivas/AFP/Getty Images

More on possible EU retaliation, courtesy Reuters:

The market falls are continuing.

The Dow Jones Industrial Average is now down 1.3%, the FTSE 100 has fallen 1.4% and Germany’s Dax is down 2.3%. Chris Beauchamp, chief market analyst at IG, said:

The selling continues apace across markets this afternoon, with the phrase ‘sea of red’ getting an outing once more. It is indeed a ‘risk-off’ afternoon in the old-fashioned sense of the term, with gold being furiously bought as risk assets are dumped unceremoniously overboard.

Tariffs do not go down well, it seems. European markets, with their heavy concentrations of industrial stocks, are suffering a double whammy of US tariff concerns and the return of their old foe, a stronger euro. In London the big news has been the speech from the Prime Minister. As ever, it has generated the usual variety of responses, but the aim of conciliatory approach from the UK runs through the text, emphasising the need for both to come together. Given it has been so heavily trailed there has been little market reaction, and the ball now lies in Brussels’ court.

While Friday harks back to the crisis days of market volatility, the weekend will resemble those of times past too, as markets wait for results from Germany and Italy. Both are important in their own way, and will help set the tone come Monday, although in the case of Italy maybe no government will be better than one committed to disrupting the established order?

The Kremlin may be concerned about the proposed Trump tariffs but Russia’s steel makers should be pretty much unaffected, Reuters is reporting:

Russian metals and mining companies face relatively little harm from any introduction of U.S. tariffs on steel and aluminium imports, analysts and company representatives said on Friday.

Russia’s top two steelmakers and its leading aluminium producer saw their share prices fall after President Donald Trump said he would impose hefty tariffs to protect U.S. producers...

Russia shares Europe’s concern about the decision, Kremlin spokesman Dmitry Peskov said on Friday, adding that Moscow is “carefully analysing the situation which is forming in trade relations after this statement”.

Russian deputy prime minister Arkady Dvorkovich said he expected some damage to Russia from the new duties, Interfax news agency reported, but he added that any harm would be more significant for the European Union and China.

Analysts also said the long-term impact for Russian steel and aluminium producers would be muted.

For Severstal, a leading steel producer, and Rusal, the small size of their U.S. sales makes it easy to redirect to other markets, analysts said.

The roughly 300,000 tonnes of steel that Severstal exports to the United States can easily be channelled elsewhere, BCS Global Markets experts said.

This was echoed by company representatives, who told Reuters the United States accounted for just 2 percent of Severstal’s sales, though the company’s shares were down 2 percent.

“As for aluminium, it is a virtually zero issue as Rusal sells only around 10 percent to 15 percent of volumes there and will send the material elsewhere at virtually no cost,” BCS wrote in a note.

Rusal, controlled by businessman Oleg Deripaska, saw its share price fall 3.3 percent. The company did not reply to a request for comment.

Russian steelmakers with sizeable exports to the United States would be protected from the impact of tariffs by their U.S. assets, analysts said.

Steel producer Evraz, co-owned by Chelsea football club owner Roman Abramovich, exports 0.4 million tonnes of steel slabs to the United States, but its North American assets sell 2.2 million tonnes on the U.S. market, VTB Capital analysts said. Domestic price rises would more than offset the new costs.

US consumer confidence rises in February

More indications of a positive US economy, which in turn adds to the case for further interest rate rises from the Federal Reserve.

US consumer confidence came in at a better than expected last month, according to the University of Michigan. Its consumer sentiment index rose from 95.7 in January to a final figure of 99.7, better than the expected 99,5 but just below the initial reading of 99.9. The rise came amid the stock market turmoil seen in February and before the latest trade war fears, but followed the Trump tax reforms.

The survey’s chief economist Richard Curtin said:

Consumer sentiment remained quite favorable in February, at its second highest level since 2004. Consumers based their optimism on favorable assessments of jobs, wages, and higher after-tax pay. The highest proportion of households since 1998 reported that their finances had improved compared with a year ago and anticipated continued gains during the year ahead.

Economic news heard by consumers continued to be dominated by the tax reform legislation and net job gains, which was untarnished by the consensus view that interest rates would increase and stock prices would remain volatile. Although rising interest rates was seen as a reason to temper their longer term outlook for the overall economy, only a modest moderation in the pace of economic growth was anticipated.

Although consumers expected the unemployment rate to dip below 4% in 2018, only modest wage growth was anticipated, and inflation expectations have remained unchanged. Interest rates, even when pushed higher in the weeks and months ahead, will not cause postponement of discretionary purchases as long as income continues to rise near its present pace. Personal tax cuts are crucial to spur additional spending, but unlike prior cuts that had an immediate positive impact, this tax cut has not generated universal support across partisan lines. Overall, the data signal an expected gain of 2.9% in real personal consumption expenditures during 2018.

usconsum2march

A bit of historical context. The last time the US went big on protectionism it ended in the Great Depression. Here’s a piece from my colleague Dominic Rushe from earlier in the year when Trump was also talking tough on trade :

With no sign of recovery in stock markets Fawad Razaqzada, market analyst at Forex.com, said:

Will we really see the start of a trade war? The truth is, the world relies on the US in one way or the other. Retaliation could only hurt the retaliator. So these warnings may not be backed up by action. In fact, there is even the small possibility that Trump may do a U-turn. However, Trump does seem to enjoy global confrontation and with mid-term elections fast approaching, he may press ahead as he aims to protect domestic companies from what he feels unfair trade arrangements.

So, as we head into the weekend, sentiment towards both the stock markets and the dollar are clearly negative. The dollar is doing slightly better against commodity currencies, which tend to be move up and down with risk appetite changes. However, against the euro and in particular, the yen, a safe haven currency, the greenback looks rather weak.

An economist’s view of the Trump tariffs:

Wall Street slumps after Trump tariffs

The prospect of a trade war prompted by Donald Trump’s proposed tariffs on steel and aluminium imports has unsurprisingly sent US markets sharply lower.

The Dow Jones Industrial Average is currently down 322 points or 1.2% while the S&P 500 opened down 0.8% and the Nasdaq Composite just over 1%.

Trump promises "reciprocal taxes"

More from Trump, policy by tweet:

European Aluminium, a Brussels based association representing more than 600 plants in 30 European countries, has called on the European Commission and the EU to protect the industry in the wake of Trump’s tariff plans. It said:

“We regret President Trump’s decision to impose a tariff on all aluminium imports independent of their country of origin. European aluminium exports to the US, in view of both their quantity and characteristics, do not pose any threat to US national security.

“Most importantly, this blanket tariff does not address the root cause of the main challenges faced by the aluminium industry today: the unsustainable and steady increase of aluminium overcapacities in China.

“This global challenge can only be managed effectively through a global and long-term solution based on multilateral rules and common enforcement such as the creation of a Global Aluminium Forum within G20,” commented Gerd Götz, Director General of European Aluminium.

These unprecedented measures threaten to destabilize global trade flows. As a result of the tariff, European Aluminium fears a disruption of the current trading relationship between the United States and Europe, which have strongly interlinked value chains and a significant number of multinationals operating in both territories. The association also expects that the measures will likely result in a redirection of aluminium products from third countries to Europe. Decisive actions must be taken to neutralise effects on European companies.

“The European value chain is already under enormous pressure due to global overcapacities, the announced measures put thousands of jobs in over 600 plants, many of which are SME’s, in countries such as Germany, Italy, France, Spain, Sweden and Central and East European countries at risk. We urge the European Commission and EU Member States to implement without further delay actions to protect our industrial interests, in line with international trade rules” concludes Götz.

Speaking of possible European retaliation, French finance minister Bruno Le Maire said there would be a co-ordinated European response if the move went ahead.

He told reporters all options were on the table and there would be a “strong, unilateral and co-ordinated” response from the EU. He added:

These unilateral measures are not acceptable. They would have a major impact on the European economy and French companies like Vallourec and Arecelor.

Bruno Le Maire
Bruno Le Maire Photograph: Eric Piermont/AFP/Getty Images

[Quotes courtesy Reuters]

Long gone are the days when Donald Trump hailed the spectacular performance of the stock market:

The American Chambers of Commerce in the EU is also not happy with the President’s tariff proposals:

US government plans to impose tariffs and limits on imports of steel and aluminium on the basis of national security, authorised under Section 232 of the Trade Expansion Act of 1962, would fail to appropriately address legitimate concerns regarding global overcapacity. It also risks a deterioration in transatlantic economic and political relations that could threaten jobs, investment and security on both sides of the Atlantic.

The American Chamber of Commerce to the EU (AmCham EU) shares the US government’s concerns regarding global overcapacity of steel and aluminium, which can hurt domestic jobs in the EU and the US and encourage unfair trading practices. However, this decision would unfairly target European manufacturers and would not address Chinese excess capacity, the root cause of the issue. As referenced by European Commission President Jean-Claude Juncker, the decision could lead to retaliatory measures by the EU against US companies and also could contravene World Trade Organization (WTO) rules. American companies employ more than 4.7 million workers in Europe, with aggregate US investment totalling more than €2 trillion in 2017.

Susan Danger, CEO, AmCham EU, said: “Addressing global overcapacity of steel and aluminium requires coordinated action by the EU and the US. Unilateral US government actions would fail to address this issue and instead risk harming America’s relationship with Europe, its staunchest ally.”

President Trump’s planned tariffs may not actually take place, says Andrew Kenningham, chief global economist at Capital Economics. But if they do, there is likely to be retaliation. He says:

Steel and aluminium account for about 2% of world trade, so the direct impact on the global economy of the tariffs President Trump announced yesterday would be minimal. But the fact that they are being justified under a flimsy pretext of national security increases the risks of retaliation.

Will these tariffs actually be implemented? Not necessarily: after all, we are talking about Trump! He said he will sign the executive order next week, but there will doubtless be opposition from Congressional Republicans, US corporations and US allies. This, and the dip in the stock market, may cause Trump to change his mind. And it is possible that when the order is written it will allow exceptions for allies, such as Canada and Germany, who (unlike China!) are big sources of US steel imports....

steeltarrifs

Will other governments retaliate? Probably. Canada has said it would “take measures to protect its domestic trade interests and workers”; Brazil has said the same; and the EU has reportedly discussed possible targets for retaliation. Other governments may also move to protect their own steel industries, which would be legal under WTO terms. That said, we suspect that any retaliation, from these countries and China, would be targeted and proportionate in order to try to prevent the problem escalating.

What is the biggest risk? The real worry is that this marks a turning point in US trade policy, away from bluster and brinkmanship towards actual protectionist measures. We have consistently warned that this would become more likely as the mid-term and presidential elections approach. If so, President Trump may discover that, contrary to his tweet this morning, there are rarely any winners from trade wars.

Updated

An influential member of the European Parliament has warned that Europe must retaliate if the US imposes tariffs on steel and aluminium.

Manfred Weber, chairman of the EPP Group of centre-right MEPs, suggested that Europe would need to throw its forces into any trade war, saying:

“The US President is playing a very dangerous game. A trade dispute is to the detriment of everyone. But if Donald Trump increases tariffs on European goods for no reason, then Europe must react.

Priority must be given to protecting jobs in Europe. The EU has to show its strength.”

European stock markets are having a bad day
European stock markets are having a bad day Photograph: Sky News

WSJ: Tariffs are Trump's biggest blunder

The Wall Street Journal has generally taken a more positive view of Donald Trump’s presidency than rival newspapers (to the anger of some staff). But not on this occasion.

Today, the WSJ editorial board have roasted the president’s move on tariffs, saying it will hurt the US economy and weaken his own efforts.

It begins:

Donald Trump made the biggest policy blunder of his Presidency Thursday by announcing that next week he’ll impose tariffs of 25% on imported steel and 10% on aluminum.

This tax increase will punish American workers, invite retaliation that will harm U.S. exports, divide his political coalition at home, anger allies abroad, and undermine his tax and regulatory reforms.

President Trump just sent another tweet, defending his tariffs (in the face of widespread criticism from home and abroad)

Electrolux puts $250m US investment on ice after tariffs

If a trade war is really breaking out, then kitchen equipment maker Electrolux has just fired another shot - by threatening to pull investment in America.

Reuters has the details:

Sweden’s Electrolux, Europe’s largest home appliance maker, said on Friday it would put on hold a planned $250 million investment in the United States after President Donald Trump announced he would impose tariffs on imported aluminium and steel.

“We are putting it on hold. We believe that tariffs could cause a pretty significant increase in the price of steel on the U.S. market,” Electrolux spokesman Daniel Frykholm said.

Economics professor Adam Posen has roundly blasted the idea of imposing fresh tariffs on imports of steel and aluminium into the US.

Posen, the president of the Peterson Institute for International Economics, told CNBC the plan was “just straight up stupid,”, adding:

This is fundamentally incompetent, corrupt or misguided.”

Posen also took issue with President Trump’s argument that he was protecting US jobs and industries, as:

Steel is just a tiny input in the U.S. gross domestic product (GDP) — which is why it’s so crazy.

According to CNBC, there were roughly 140,000 Americans employed in steel mills in 2015, while 6.5 million Americans worked in industries that consumed steel. More here.

The Mexican peso is sliding this morning, making it the worst-performing major currency against the US dollar.

Trump’s protectionist stance on trade wars and tariffs are undermining hopes that America could rejoin the NAFTA pact.

EC: We'll hit back against Trump's tariffs

The European Commission has warned it will impose countermeasures against America, if new tariffs are imposed on EU aluminium and steel.

EC president Jean-Claude Juncker has vowed to ‘react firmly’ to president Trump’s move, saying:

“Instead of providing a solution, this move can only aggravate matters. The EU has been a close security ally of the US for decades. We will not sit idly while our industry is hit with unfair measures that put thousands of European jobs at risk. The EU will react firmly and commensurately to defend our interests.

The Commission will bring forward in the next few days a proposal for WTO-compatible countermeasures against the US to rebalance the situation.

Kremlin concerned about Trump's tariffs

The Kremlin.
The Kremlin.

Russia has also expressed concern over Donald Trump’s plans.

In a daily briefing with journalists, Kremlin spokesman Dmitry Peskov said that Moscow shares European capitals’ concern with reports of the adoption of new steel and aluminium tariffs by the United States.

“This situation deserves close attention,” Peskov, who serves as a personal spokesman to Russian President Vladimir Putin, told journalists by phone.

Peskov added:

“We know that extreme concern has been expressed in many European capitals with these kinds of decisions.

We share this concern and are carefully analysing the situation which is unfolding now in trade relations after this announcement.”

Updated

Markets suffer heavier losses after Trump tweet

Stock markets are falling deeper into the red, following Donald Trump’s declaration that America could easily win a trade war.

In London, the FTSE 100 is now down 73 points, or 1%, at 7101. That’s a new three-week low.

Mining companies are suffering from the prospect of protectionism - as demand for iron ore, coal, copper, oil and nickel would all weaken.

Germany’s DAX is still lurching around a six-month low.

Lukman Otunuga, research analyst at FXTM, says investors around the globe are worried:

A negative vibe lingered across financial markets on Friday, after Donald Trump’s vow to impose severe tariffs on imports of steel and aluminium sparked fears of a global trade war.

In a move that dealt a blow to global sentiment, Trump said on Thursday that the United States would set tariffs of 25% on steel imports and 10% on aluminium.

This bombshell development is likely to fuel concerns of retaliatory actions from major US trade partners consequently weighing on risk appetite. Investors are clearly jittery by the threat of a potential global trade war and its possible effect on stock markets.

Wall Street is also expected to suffer falls when it opens in three hours time.

The Dow Jones industrial average is being called down around 200 points, or 0.9%. That would add to yesterday’s 420-point tumble.

Updated

Trump: America can win big in a trade war

Newsflash: President Trump has tweeted that it will be easy for America to win a trade war:

That’s unlikely to calm nerves in the financial markets....

David Lowe, head of international trade at law firm Gowling WLG, predicts that president Trump could announce more protectionist policies in the weeks ahead.

Lowe says:

“All the figures suggest that the first year of any administration is the calm before the storm. The groundwork is done and the wind builds. Now Trump’s first year is complete with the potential for the floodgates to open, it’s safe to assume this may not be the only shock policy announcement.”

A recent report from Gowling found that the USA has the biggest protectionist stance across the world. Since 2009, it has made 1,085 more protectionist measures more than liberalising ones.

Anders Fogh Rasmussen, the former head of Nato and ex-Danish prime minister, warns that tariffs will hurt a range of US businesses who use steel.

He also fears that Europe could face pressure to become more protectionist too.

Canada, Brazil and Russia will all be hit hard by new tariffs on steel and aluminium imports into America, according to the Economist Intelligence Unit.

They say:

The countries that will be hardest-hit by the tariff include some of the US’s biggest trading partners.

The commerce department reported that the biggest importers of steel in 2017 were (in descending order) Canada, Brazil, South Korea and Russia. China was 11th, supplying just 2% of the total. For aluminium, the biggest importers were Canada, Russia, China, the UAE and Bahrain. (China supplied 11% of the total.)

The EIU also expect other countries to hit back:

We expect other countries, notably China, to retaliate in kind. The tariffs are a particular snub to the Chinese government, which had sent its leading trade envoy, Liu He, to Washington to discuss the US-China relationship.

Earlier this week, the EIU warned that a trade war would be a major threat to global stability. Yesterday’s comments from Trump haven’t changed that view...

Global risks

Updated

Bank of England Mark Carney is discussing cryptocurrencies now - there’s a live feed here.

German Foreign Minister Sigmar Gabriel said in a media interview that he was“extremely concerned” about Donald Trump’s planned tariffs on steel and aluminum.

“A sweeping move against the rest of world by the US”, Gabriel told the Funke group of newspapers, “would hit our exports and jobs amongst the hardest”.

Gabriel said:

“I hope that President Trump reconsiders his announcement.

We need to do everything possible to avoid an international trade war.”

The president of the Federal Association of German Industry, Dieter Kempf, described America’s “policy of partition” as a mistake, adding:

“US president Donald Trump is risking a world-wide trade conflict and a spiral of protectionism that will end up also costing American jobs”.

Updated

President Trump’s plan to slap tariffs on steel and aluminium imports has gone down badly with the Institute of Economic Affairs, the free-market think-tank.

Kate Andrews of the IEA it will hurt Americans:

Mark Carney has also warned that Bitcoin looks like a bubble, and could have a ‘pretty brutal reckoning’

BoE governor Mark Carney calls for bitcoin regulation

A neon sign hanging in the window of Healthy Harvest Indoor Gardening in Hillsboro, Ore., shows that the business accepts bitcoin as payment.

Breaking: Mark Carney, the Bank of England governor, has suggested greater regulatory controls over cryptocurrencies such as bitcoin.

He has labelled them as “ inherently risky” and that they are “failing” to fulfil their most basic function as money.

Carney say governments should “regulate elements of the crypto-asset ecosystem to combat illicit activities, promote market integrity, and protect the safety and soundness of the financial system.”

He said Threadneedle Street was currently considering the risks posed to UK financial stability by bitcoin and other digital currencies, and that the Bank would report to the G20 in Argentina later this month.

At present, cryptocurrencies “do not appear to pose material risks to financial stability”, says Carney, but that they “could rise” in future as more people begin to use them.

Speaking in London because the snow stopped him from reaching Edinburgh to deliver a speech at the inaugural Scottish Economics Conference, he said cryptocurrencies were failing to meet the key tests of money set by the 18th Century Scottish economist Adam Smith - the father of modern capitalism.

“Cryptocurrencies act as money at best, only for some people and to a limited extent, and even then only in parallel with the traditional currencies of the users.

According to the governor, bitcoin has been too volatile to act as a store of value - failing a major test set of currencies - while he also said it was an inefficient means of exchange as no major high street retailers accept the digital currency.

Updated

Roy Rickhuss, the head of the Community union, fears that jobs will be lost in the UK and the US if these tariffs are imposed.

Conservative MP Simon Clarke is also very concerned about the impact on Britain’s steel industry:

Clarke, who represents Middlesbrough South and East Cleveland, is also vice chairman of the of the All Party Parliamentary Group for Steel.

UK Steel: Trump's tariffs would hurt British industry

An employee at Liberty House Group’s rolling steel mill in Newport.
An employee at Liberty House Group’s rolling steel mill in Newport. Photograph: Bloomberg/Bloomberg via Getty Images

Back to tariffs.... and British unions are very alarmed by the prospect of America imposing swingeing costs on steel and aluminium imports.

Richard Warren, head of policy at UK Steel, fears that president Trump will impose ‘blanket measures’ on all steel imports, regardless of their origin.

Warren says this would be an “extremely blunt” way of tackling the problem of overcapacity in the global steel industry.

This requires a coordinated global approach. Whilst we all too well understand the frustrations of the US sector, measures such as these smack of short-termism, protectionism and would be rife with unintended consequences for global trade and for the users of steel in the US.

“At a UK level, our sector exports some £360 million worth of high-value steel products into the US each year, almost 15% of our exports. These measures, would seriously undermine our ability to compete in this market. Equally there is significant apprehension about the indirect impacts of these measures in the form of steel trade diverted away from the US to other markets, such as the UK. In short, these measures would cause serious damage to the prospects of many steel producers here.

UK Steel is urging Theresa May to push for “a robust response from the EU”, adding:

“If next week’s official announcement does reveal the worst, there is a strong message here for the UK Government as well. In its imagined post-Brexit role as the vanguard for global free trade, it must remember that not everyone is on the same page and not everyone is playing by the same rules.

Whilst we have to resist any urge to mirror such protectionist moves, we must at the same time be clear-eyed and equip ourselves with tools to respond effectively and protect our interests when necessary.”

UK construction activity picks up

Newsflash: Activity across Britain’s building sector picked up last month, but remains weak.

Data firm Markit reports that commercial construction strengthened in February, but civil construction and housebuilding was weaker.

Builders reported that new work decreased for the second month running, while total business activity increased only marginally.

Markit says:

Anecdotal evidence suggested that fragile business confidence and ongoing political uncertainty remained key factors holding back client demand.

This pushed the monthly construction PMI, which measures activity, up to 51.4 from 50.2 (which was close to stagnation).

Construction PMI
Construction PMI Photograph: Markit

In other news, the Weinstein Company has been saved from bankruptcy.

The firm, co-founded by disgraced media mogul Harvey Weinstein, is being acquired by an investment team led by billionaire Ron Burkle and Maria Contreras-Sweet, the former head of President Obama’s Small Business Administration.

It had been expected to fold, after talks with Burkle and Contreras-Sweet’s group had hit deadlock.

Contreras-Sweet says the move will save 150 jobs, protect the small businesses who are owed money and create a victims’ compensation fund for those who suffered from the sexual harassment scandal.

Newsflash: Germany’s main stock index, the Dax, has hit a six-month low.

German Foreign Minister Sigmar Gabriel has said he’s ‘very concerned’ by Donald Trump’s move, and called on the EU to respond decisively.

Speaking to German media, Gabriel says he hopes Trump will reconsider the tariffs announced last night.

A Chinese flag.

China has expressed “grave concern” over US plans to impose tariffs on steel and aluminium, with the move likely to hurt US allies as well as Chinese producers.

Donald Trump’s announcement that the US will impose tariffs of 25% on steel imports and 10% on imported aluminium next week sent stock markets around the world tumbling and could prompt other countries to take action.

The Chinese side expresses grave concern,” the ministry of commerce said.

The statement did not mention any retaliatory steps but encouraged Washington to solve disputes through negotiation. Chinese officials have previously said they would take “necessary measures” to defend national interests.

Australia: These tariffs don't help anyone

Australian Trade Minister Steve Ciobo.
Australian Trade Minister Steve Ciobo. Photograph: Lukas Coch/AAP

Australia’s government is already scrambling to protect its manufacturers from the impact of new tariffs on steel and aluminium.

It is “urgently lobbying the Trump administration for an exemption” to the move, according to the AAP newswire.

Here’s more details:

Federal Trade Minister Steve Ciobo labelled the decision, which comes a week after Prime Minister Malcolm Turnbull raised the issue with the president in Washington DC, “disappointing”.

“The imposition of a tariff like this will do nothing other than distort trade and ultimately, we believe, will lead to a loss of jobs,” he told reporters in Sydney on Friday.

The government is concerned retaliatory measures by other major economies could trigger a slowdown in the global economy.

“That is in no one’s interest,” Mr Ciobo said.

History shows that trade wars aren’t good for stocks - and encourage nervous investors to pile into safe-haven government debt instead.

European steelmakers are being hit this morning, with ArcelorMittal’s shares down 2%.

Across the markets, the industrials sector has lost 1% while basic materials is down 0.9%.

European stock markets this morning
European stock markets this morning Photograph: Thomson Reuters

FTSE 100 hits three-week low

The London Stock Exchange (LSE) in London.

Britain’s blue-chip share index has hit its lowest level since 12 February, as worries of a trade war sweep through the City.

The FTSE 100 shed 42 points, or over 0.5%, at the start of trading in London.

Mining companies are among the fallers, as investors calculate that slapping tariffs on steel and aluminium could hit demand for commodities.

Other European indices are also falling in early trading; Germany’s DAX has lost 1% and France’s CAC has shed 0.75% as traders worry about the implications of Trump’s move.

Mike van Dulken of Accendo Markets says:

The negative open follows a sharply lower close on Wall St that flowed into Asia overnight after President Trump sparked concerns of a protectionist trade war with China and the EU by announcing his intention to impose import tariffs on steel and aluminium.

Trump's tariffs: What the experts say

Several experts have warned that Donald Trump’s decision to impose tariffs on steel and aluminium imports could trigger retaliatory action, and even a full-blown trade war:

Robert Carnell of ING

“The world stands on the brink of a trade war as Donald Trump announces severe tariffs on steel and aluminium... this is how recessions start.

“Trade is just about the only thing economists are agreed on - more is better.”

Adam Cole of Royal Bank of Canada

As had been foreshadowed yesterday, President Trump announced new tariffs on Steel (25%) and aluminium (10%) imports late yesterday.

Many of the US’s main trading partners have said they will respond with reciprocal action. Generally, restrictions on world trade would be less negative for relatively closed economies, like the US, and hence positive for USD. But the risk of a bilateral trade war with China makes the current situation different, given China’s large holdings of USTs.

Jasper Lawler of London Capital Group

Under the pretext of national security, Trump has announced tariffs on steel and aluminium imports. However, it still remains unclear whether this will be applied to imports from all countries or just some. Whilst one of Trump’s aims is to encourage China to reform its practises, the reality is that Canada and Brazil are bigger exporters to the US than China.

Whilst market eyes have been firmly on interest rate expectations and recent volatility, no one was preparing for a potential trade war. The broader market sold off as these tariffs are creating and uncertain environment trade wise and the market hates any interventionist policy from governments. Whilst US steelmakers and aluminium makers rallied hard following the announcement, the Dow closed 430 points lower, whilst the S&P 500 and the Nasdaq closed 1.6% and 1.7% respectively.

The agenda: Trump trade war fears spooks investors

President Trump Meeting With Steel And Aluminum Manufacturing Industry Leaders on Thursday
President Trump Meeting With Steel And Aluminum Manufacturing Industry Leaders on Thursday Photograph: UPI / Barcroft Images

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

The markets are taking a hammering this morning after Donald Trump slapped tariffs on steel and aluminium.

The US president announced plans to impose tariffs of 25% on imported steel, and 10% on aluminium “for “a long period of time”.

In another example of his America First agenda, Trump told metal industry bosses that:

“You’re going to have protection for the first time in a long time.”

We don’t have full details of the plan yet. But the broad-brush announcement has triggered fears of retaliatory action from other countries, notably China.

A trade war could slow global trade, undermine globalisation, hurt economic growth and push up costs.

Wall Street reacted swiftly last night, sending the Dow Jones down 420 points. Asia has been hit too, and European markets are dropping in early trading (more on that shortly).

As my colleague Dominic Rushe reports:

The Nikkei index in Japan fell 2.4%, Hong Kong and South Korea were down 1.6%, and the ASX200 in Sydney was off 1% in early afternoon trading. Asian steelmakers bore the brunt. South Korea’s Posco fell 3% and Japan’s Nippon Steel 4%.

Michael McCarthy of CMC Markets in Sydney said it was a “sharp reminder of the initial negative reaction to the election of Mr Trump ... An explanation may come, but the initial market interpretation of the move is rank populism. The lack of structure makes anticipating further measures and possible responses to retaliatory moves difficult to predict.”

Also coming up today

We find out how Britain’s building sector fared in February, when Markit releases its monthly construction PMI.

Traders will be watching the pound closely, as Theresa May gives a big speech on Brexit. The PM is expected to urge both sides of the Brexit debate to reunite for the good of the country....

There may be some disappointed faces in Edinburgh. Bank of England governor Mark Carney had been due to address the inaugural Scottish Economics Conference in person - but due to the snow, he’ll scrapped the trip and will speak by video link.

We also discover how Canada’s economy fared in the last three months of 2017.

The agenda:

  • 9.30am GMT: UK construction PMI for February
  • 10am GMT: Mark Carney speaks to the Inaugural Scottish Economics Conference.
  • 1.30pm GMT: Canadian GDP
  • 1.30pm: Theresa May’s Brexit speech

Updated

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