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Moody’s: US steel tariff is credit negative for the European steel industry

Donald Trump's steel import tariff is credit negative for the European steel industry, influential ratings agency Moody's said today.

The US President plans to approve a unilateral 25 per cent tariff on steel imports as well as a 10 per cent tariff on aluminium imports, which has prompted fears of a trade war.

Though much is still uncertain about the tariff, Moody's said it would limit European producers' access to their third-largest export market and it would also encourage more imports into Europe from countries looking to redirect cheaper steel from the US. The latter is potentially a more severe outcome of the tariff, Moody's said.

Read more: Trump's new tariffs will "seriously undermine" the UK steel industry

Gianmarco Migliavacca, vice president and senior credit officer at Moody’s, said the tariff should not have an immediate impact on European steelmakers that it rates, like Luxembourg's ArcelorMittal and Helsinki-based Outokumpu, because they generate most of their US revenues from steel mills in the US rather than from steel they export to the country.

"Their US operations will start to benefit from the expected rise in steel prices once the tariff is in place," he said.

Tariffs will hurt the European steel industry as a whole though by creating distortions that are "potentially large", but currently difficult to quantify, Moody's said.

The European Union has threatened to slap a tax on US goods like Levi jeans and bourbon if Trump goes ahead with the steel tariff.

"We are looking at possibilities to retaliate, meaning we will also put taxes or tariffs on US imports to the European Union," Cecilia Malmström, EU commissioner for trade, told the BBC today.

Trump doubled down on the decision early this morning following a call with Prime Minister Theresa May last night where she expressed her "deep concern" over the move.

A formal announcement is expected to be made this week.

Read more: Is there any justification for Trump’s steel imports?

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