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Start of a Wider Trade War? | Leadership Changes in Europe
Published June 1, 2018
Prime Minister Justin Trudeau retaliated swiftly against President Donald Trump’s metals tariffs by imposing his own levies on as much as $16.6 billion of US imports in what Canada calls its strongest trade action since the Second World War. Trudeau appealed to decades of battles fought alongside the US and defending North American airspace as proof the US tariffs based on a national security investigation are “unacceptable” and “punitive.” Chrystia Freeland had stated that “the US measures, aimed at Canada, Mexico and the European Union, are illegal and counterproductive”. Many members of the Canadian government were perplexed by the notion that Canada could ever be considered a national security threat to such an important ally. Canadian Finance Minister Bill Morneau acknowledged that trade has taken center stage at a meeting of finance ministers and central bankers from the G-7 nations.
At 8:30 EST, payrolls data for May are released, with many economists expecting 190,000 new positions added. With the unemployment rate expected to hold at 3.9%, attention is likely to remain on signs of labour market tightness, especially wages. Average hourly earnings are forecast to continue posting modest growth of 2.6% year on year.
The European Union will impose “counter-balancing measures” after the United States announced tariffs on steel and aluminium imports from the Canada, Mexico and the EU, the European commission chief said. The EU said it would take immediate steps to retaliate. The European Union Ambassador to the US, David O’Sullivan, stated that the EU has offered to discuss trade issues with the United States. “We can only do that in an atmosphere of trust and confidence, and the imposition of these tariffs by the United States damages that mood.”
Spanish Prime Minister Mariano Rajoy was defeated Friday, overcome by the stunning revelations of corruption claims that has grown throughout his seven years in office. Rajoy was ejected by a no-confidence vote in parliament after the anti-establishment group Podemos and Catalan separatist groups lined up behind Socialist leader Pedro Sanchez. Sanchez is due to be sworn in as premier by King Felipe in the coming days.
Italy’s populist Five Star Movement and League parties are prepared to move into power with a program for fiscal expansion that poses a challenge to European rules. Giuseppe Conte, will be sworn in as prime minister along with his cabinet on Friday by President Sergio Mattarella. The government was established after almost three months of confusion which saw Five Star’s Luigi Di Maio and the anti-immigrant League’s Matteo Salvini threaten early elections. Di Maio and Salvini will serve as deputy premiers, with economist Giovanni Tria as finance minister, and euro-skeptic economist Paolo Savona holding the responsibility for European affairs.
Secretary of State Mike Pompeo said the US and North Korea made “real progress” during talks in New York over the conditions for a summit between Trump and Kim Jong Un, but declined to say if the two sides bridged key differences over issues such as denuclearization. The diplomatic focus will shift to Washington on Friday, where Trump will host Kim Yong Chol, the former spy chief who led the talks with Pompeo and who is carrying a personal letter to the US president from Kim Jong Un.