Opinion: Trump’s trade own goal
While the impact on the UAE of US President Donald Trump’s vow to impose tariffs on steel and aluminium imports remains to be seen, its damage to America’s standing abroad should not be underestimated, say observers.
Trump’s move has provoked harsh condemnation at home and abroad, and the European Union has already promised to retaliate by imposing tariffs on American products ranging from Harley-Davidson motorcycles to Levi’s jeans.
In Germany, a spokesman for Chancellor Angela Merkel warned that tariffs could lead to a global trade war that would not be in any one’s interest. The curt assessment from the International Monetary Fund’s managing director Christine Lagarde was: “Nobody wins”.
Who really wins?
In the UAE, however, the largest steel and aluminium companies have downplayed the potential negative impact of tariffs. Emirates Global Aluminium (EGA) acknowledged that while the US represents “an important market” for the company, it is “well prepared for whatever market conditions may arise.”
Emirates Steel CEO Saeed Al Remeithi, for his part, noted that “there will be some effect” on the company, which sends five percent of its total exports to the US.
Danny Sebright, the head of the Washington DC-based US-UAE Business Council, noted that while the 290,000 tonnes of steel exported to the US from the UAE amount to a small fraction of the 32 million tonnes imported each year, for the UAE economy “it’s obviously important and means something”.
EGA and Emirates Steel have recently posted strong financial results which suggest that, even if Trump’s tariffs affect their business, they’d be able to weather the storm. Just last week Emirates Steel announced that it had made more than AED6.6bn in revenue in 2017, with export sales accounting for 20 percent of the total volume of steel produced.
EGA, for its part, saw revenues jump 20 percent to AED20.5bn, with a strong customer base in more than 60 countries.
While the proposed tariffs may well present some challenge to companies such as EGA, Emirates Steel and others in the UAE – particularly in light of US officials’ comments that there will be no country exemptions – the negative effects will be faced mainly by the US, according to analysts.
Speaking to local media, Sebright said that EGA’s “high-end” aluminium exports to the US are vitally important to the American defence industry.
“The UAE exports an aluminium product into the US that is only made by one smelter, and it’s the most high-end aluminium that goes into our civil and fighter aircraft,” he said. “It’s very critical to our national security.”
Sebright believes that the American public have more to lose from the imposition of tariffs than the country’s trade competitors abroad, whether they be in the UAE or further afield.
“American consumers and workers are going to be hurt far more by this than others will be around the world,” he said.
“We have a lot more to lose in the long-term than we have to gain. We’re protecting a couple of hundred thousand workers, in comparison to raising the prices of goods and services – in an inflationary period – that will affect workers in all sorts of industries, from cars to manufacturing to consumer goods,” he added.
Sebright added that the move has “enormous” ramifications and implications for America’s relationships in a globalised world. He blames the tariff proposals on US domestic policies and Trump’s efforts to fulfil campaign promises to voters in America’s so-called rust belt.
Those comments were echoed by IMF spokesperson Gerry Rice, who said that import restrictions “… 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.
“We are concerned that the measures proposed by the US will, de facto, expand the circumstances where countries use the national-security rationale to justify broad-based import restrictions,” he concluded.
A united opposition
Criticism of Trump’s proposed tariffs has cut across the political spectrum in America, with Republican House Speaker Paul Ryan being unusually vocal in his criticism. “We are extremely worried about the consequences of a trade war and are urging the White House to not advance this plan,” said AshLee Strong, Ryan’s spokesperson.
“The new tax reform law has boosted the economy and we certainly don’t want to jeopardise that.”
Despite the condemnation that Trump’s move has received at home and abroad, and speculation that there may still be “wiggle room” to negotiate exemptions for certain industries and countries, President Trump currently shows no sign of backing down, and has downplayed concerns over a trade war. But of course this is an administration where normal rules don’t apply, so there is no way of predicting what comes next.
For UAE manufacturers at least, it is business as usual.