U.S. President Donald Trump said Monday he will restore tariffs on U.S. steel and aluminum imports from Brazil and Argentina, surprising officials in the two South American countries and prompting them to seek explanations.
Emerging market stocks and the highly sensitive Mexican peso slid to session lows following Trump’s vow in an early-morning post on Twitter that gave no other details on the planned trade action.
Representatives for the Office of the U.S. Trade Representative could not be immediately reached for comment.
Trump accused the two countries of hurting American farmers through currency manipulation.
“Brazil and Argentina have been presiding over a massive devaluation of their currencies, which is not good for our farmers. Therefore, effective immediately, I will restore the Tariffs on all Steel & Aluminum that is shipped into the U.S. from those countries,” Trump wrote.
Brazil and Argentina have been presiding over a massive devaluation of their currencies. which is not good for our farmers. Therefore, effective immediately, I will restore the Tariffs on all Steel & Aluminum that is shipped into the U.S. from those countries. The Federal….
Both Brazil and Argentina are among a group of U.S. allies that Trump had exempted from steel and aluminum tariffs in March 2018.
Brazil’s President Jair Bolsonaro, an avowed Trump fan who has actively sought closer U.S. ties, said in local radio interview he did not think Trump’s decision was a form of retaliation. However, he also expressed hope that Trump would show mercy to Brazil’s commodity-based economy.
“I’m going to call him so that he doesn’t penalize us,” Bolsonaro said. “Our economy basically comes from commodities, it’s what we’ve got. I hope that he understands and that he doesn’t penalize us with this, and I’m almost certain he’ll listen to us.”
Argentine Production Minister Dante Sica said Trump’s announcement was “unexpected” and he was seeking talks with U.S. counterparts. In addition, Argentina’s Foreign Ministry said it will begin negotiations with the U.S. State Department.
Argentina is mired in an economic crisis with rampant inflation, deep indebtedness, widespread poverty and a currency that has plunged under the leadership of President Mauricio Macri, who came to power in 2015 with promises to boost South America’s second largest economy. Macri was defeated in elections in October and will leave office next week.
Brazil is grappling with stubborn double-digit unemployment and its economy is headed toward its third straight year of roughly one per cent growth, following two years of deep recession.
Both countries have benefited from the U.S. trade war with China. Argentina and Brazil have taken advantage of Chinese import taxes on U.S. farm products to export more agricultural goods to China.
Trump on Monday also urged the Federal Reserve to prevent countries from gaining an economic advantage by devaluing their currencies.
“The Federal Reserve should likewise act so that countries, of which there are many, no longer take advantage of our strong dollar,” Trump tweeted. “Lower Rates & Loosen – Fed!”
Trump has repeatedly urged the U.S. central bank to lower rates to below zero, arguing that negative rates in Europe and elsewhere give those countries a competitive advantage.
However, Fed policymakers have been reluctant to take the unorthodox policy steps tried by other global central banks. The U.S. central bank’s policymaking committee holds its next meeting on Dec. 10 and 11.