EU warns Trump of trade war after US announces new tariffs could be implemented

LUXEMBOURG/GENEVA, March 7 (Reuters) - Europe and the IMF urged Donald Trump on Wednesday to step back from the brink of a trade war, after the resignation of his economic adviser emboldened those encouraging him to push ahead with tariffs on imported steel and aluminum.

The departure of Gary Cohn, seen as a bulwark against Trump's economic nationalism, hit shares, oil and the dollar, as investors saw an increased likelihood of tit-for-tat trade measures that would depress global growth.

Trump plans to impose a duty of 25 percent on steel and 10 percent on aluminum to counter cheap imports, especially from China, that he says undermine U.S. industry and jobs.

But that risks retaliatory tariffs on U.S. exports - not least by Canada and Europe - and complicates talks on the North American Free Trade Area (NAFTA).

"In a so-called trade war ... nobody wins, one generally finds losers on both sides," International Monetary Fund head Christine Lagarde said on Wednesday, adding that a trade war would take a "formidable" toll on global economic growth.

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Impact of Trump's proposed steel and aluminum tariffs
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Impact of Trump's proposed steel and aluminum tariffs
NEW YORK, NY - MARCH 1: A trader is comforted by a coworker as they work on the floor of the New York Stock Exchange (NYSE) on March 1, 2018 in New York City. Major stock indexes plunged Thursday afternoon following President Trump's announcement that he was imposing a 25 percent tariff on imported steel and 10 percent on aluminum. Investor concern about the news rattled the Dow Jones industrial average, which closed down more than 400 points. (Photo by Eduardo Munoz Alvarez/Getty Images)
SAN FRANCISCO, CA - MARCH 02: Wine in aluminum cans is displayed on a shelf at Ales Unlimited on March 2, 2018 in San Francisco, California. Beverage companies that use aluminum for canned drinks are concerned that tariffs proposed by US President Donald Trump could result in higher prices for consumers and job cuts across the industry. (Photo by Justin Sullivan/Getty Images)
U.S. President Donald Trump announces that the United States will impose tariffs of 25 percent on steel imports and 10 percent on imported aluminum during a meeting at the White House in Washington, U.S., March 1, 2018. REUTERS/Kevin Lamarque
Members of trade unions hold a protest against US President Donal Trump's import surcharge on Brazilian steel and in defense of their employment, outside the US Consulate in Sao Paulo, Brazil, on March 5, 2018. Since announcing last week plans to impose a 25 percent tariff on steel imports and 10 percent on aluminium, Trump has shrugged off threats from many nations, including China, Canada, Brazil and Mexico among others. / AFP PHOTO / Miguel SCHINCARIOL (Photo credit should read MIGUEL SCHINCARIOL/AFP/Getty Images)
SAN FRANCISCO, CA - MARCH 02: Beer in aluminum cans is displayed on a shelf at Ales Unlimited on March 2, 2018 in San Francisco, California. Beverage companies that use aluminum for canned drinks are concerned that tariffs proposed by US President Donald Trump could result in higher prices for consumers and job cuts across the industry. (Photo by Justin Sullivan/Getty Images)
White House Chief of Staff John Kelly and press secretary Sarah Sanders listen as U.S. President Donald Trump announces that the United States will impose tariffs of 25 percent on steel imports and 10 percent on imported aluminum during a meeting at the White House in Washington, U.S., March 1, 2018. REUTERS/Kevin Lamarque
NEW YORK, NY - MARCH 1: Traders work on the floor of the New York Stock Exchange (NYSE) on March 1, 2018 in New York City. Major stock indexes plunged Thursday afternoon following President Trump's announcement that he was imposing a 25 percent tariff on imported steel and 10 percent on aluminum. Investor concern about the news rattled the Dow Jones industrial average, which closed down more than 400 points. (Photo by Eduardo Munoz Alvarez/Getty Images)
Members of trade unions hold a protest against US President Donal Trump's import surcharge on Brazilian steel and in defense of their employment, outside the US Consulate in Sao Paulo, Brazil, on March 5, 2018. Since announcing last week plans to impose a 25 percent tariff on steel imports and 10 percent on aluminium, Trump has shrugged off threats from many nations, including China, Canada, Brazil and Mexico among others. / AFP PHOTO / Miguel SCHINCARIOL (Photo credit should read MIGUEL SCHINCARIOL/AFP/Getty Images)
Chairman, CEO and president of Nucor John Ferriola and U.S. Steel CEO Dave Burritt flank U.S. President Donald Trump as he announces that the United States will impose tariffs of 25 percent on steel imports and 10 percent on imported aluminum during a meeting at the White House in Washington, U.S., March 1, 2018. REUTERS/Kevin Lamarque
NEW YORK, NY - MARCH 1: A trader works on the floor of the New York Stock Exchange (NYSE) on March 1, 2018 in New York City. Major stock indexes plunged Thursday afternoon following President Trump's announcement that he was imposing a 25 percent tariff on imported steel and 10 percent on aluminum. Investor concern about the news rattled the Dow Jones industrial average, which closed down more than 400 points. (Photo by Eduardo Munoz Alvarez/Getty Images)
SAN FRANCISCO, CA - MARCH 02: Wine in aluminum cans is displayed on a shelf at Ales Unlimited on March 2, 2018 in San Francisco, California. Beverage companies that use aluminum for canned drinks are concerned that tariffs proposed by US President Donald Trump could result in higher prices for consumers and job cuts across the industry. (Photo by Justin Sullivan/Getty Images)
NEW YORK, NY - MARCH 1: Traders work on the floor of the New York Stock Exchange (NYSE) on March 1, 2018 in New York City. Major stock indexes plunged Thursday afternoon following President Trump's announcement that he was imposing a 25 percent tariff on imported steel and 10 percent on aluminum. Investor concern about the news rattled the Dow Jones industrial average, which closed down more than 400 points. (Photo by Eduardo Munoz Alvarez/Getty Images)
Pacific Coast Producers president and CEO Dan Vincent stands in his cooperative's distribution center in Lodi, California, U.S., April 27, 2018. Picture taken April 27, 2018. To match Insight USA-TRUMP/TARIFFS-CANS REUTERS/Noah Berger
An employee uses a crane as he prepares to move a steel pipe at the SAW Pipe Mills, operated by Liberty Commodities Ltd., in Hartlepool, U.K., on Thursday, June 14, 2018. Steel and aluminum�tariffs�imposed by the U.S. in March may already be filtering through to prices charged by American producers of the metals. Photographer: Chris Ratcliffe/Bloomberg via Getty Images
An employee passes a stack of steel pipes at the SAW Pipe Mills, operated by Liberty Commodities Ltd., in Hartlepool, U.K., on Thursday, June 14, 2018. Steel and aluminum�tariffs�imposed by the U.S. in March may already be filtering through to prices charged by American producers of the metals. Photographer: Chris Ratcliffe/Bloomberg via Getty Images
A steel pipe enters a cleaning machine at the SAW Pipe Mills, operated by Liberty Commodities Ltd., in Hartlepool, U.K., on Thursday, June 14, 2018. Steel and aluminum�tariffs�imposed by the U.S. in March may already be filtering through to prices charged by American producers of the metals. Photographer: Chris Ratcliffe/Bloomberg via Getty Images
Identification stencils hang above steel pipes at the SAW Pipe Mills, operated by Liberty Commodities Ltd., in Hartlepool, U.K., on Thursday, June 14, 2018. Steel and aluminum�tariffs�imposed by the U.S. in March may already be filtering through to prices charged by American producers of the metals. Photographer: Chris Ratcliffe/Bloomberg via Getty Images
Sheet steel sits stacked in the store room at the SAW Pipe Mills, operated by Liberty Commodities Ltd., in Hartlepool, U.K., on Thursday, June 14, 2018. Steel and aluminum�tariffs�imposed by the U.S. in March may already be filtering through to prices charged by American producers of the metals. Photographer: Chris Ratcliffe/Bloomberg via Getty Images
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In Geneva, China raised its concerns at the World Trade Organization where 17 other WTO members also voiced misgivings.

"Many said they feared tit-for-tat retaliation which could spiral out of control, damaging the global economy and the multilateral trading system," WTO spokesman Keith Rockwell said.

A trade official quoted Canada's WTO ambassador as saying: "We fear that the United States may be opening a Pandora's Box that we would not be able to close."

"EASY TO LOSE"

In his first tweet on Wednesday, Trump showed no sign of backing down, saying the United States had lost more than 55,000 factories and 6 million manufacturing jobs and let its trade deficit soar since the first Bush administration.

"Bad policies & leadership. Must win again!" he tweeted, a day after saying he did not fear a trade war.

"When we're behind on every single country, trade wars aren't so bad," he told reporters.

But European Council President Donald Tusk, who will chair a summit on March 22-23 where EU leaders will discuss the threat of a "serious trade dispute," said Trump's view that trade wars were good and easy to win was wrong.

"The truth is quite the opposite. Trade wars are bad and easy to lose," Tusk told reporters.

He was speaking after the EU executive met to discuss a list of 2.8 billion euros ($3.5 billion) worth of U.S. products - from bourbon to Harley Davidson motorbikes - on which Europe could apply a 25 percent tariff if Trump goes ahead.

"We are eager not to escalate this," EU trade commissioner Cecilia Malmstrom said.

"We do not want this to go out of proportion, but ... if it does happen we will have to take measures to protect European jobs."

For those who fear a trade war, the candidates to replace Cohn as Trump's adviser do not bode well: Peter Navarro, the White House National Trade Council head who wrote a book called "Death by China: Confronting the Dragon — A Global Call to Action," and conservative commentator Larry Kudlow.

German Economy Minister Brigitte Zypries said: "I hope Trump changes his mind ... It's very important that there are advocates for this in the White House. That's why I'm worried about the latest signals coming from the USA."

Britain, keen to foster global trade relations as it prepares to leave the EU, said it was "very disappointed" by Trump's plan. ($1 = 0.8054 euros)

(Additional reporting by Philip Blenkinsop in Brussels, Tom Miles in Geneva Writing by Robin Pomeroy Editing by Raissa Kasolowsky and Hugh Lawson)

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