Goldman Sachs has blasted Donald Trump's plans to impose tariffs on steel and aluminium, saying the "draconian" move had created friction with key US allies.
Last week, Trump announced plans to tack a 25 per cent unilateral tariff on steel imports as well as a 10 per cent tariff on aluminium .
"By choosing across the board tariffs that are even more draconian than those recommended by [US commerce secretary Wilbur Ross], the President has likely created a two-tier metal market, US versus the rest of the world, and politically created friction with key US allies," the bank said in a note today.
While the market had expected Trump to impose steep tariffs targeted at China, Russia and other non-US allies, his plan for an across-the-board tariff "ironically eases the impact to China and Russia" while creating a larger economic impact on Canada, Mexico and the EU.
The bank also said Trump's move would create a two-tier metal market.
“Economically, a two-tier market is ultimately damaging to US downstream industries that consume these metals, as it creates an uneven playing field for US industries that face higher metal prices.”
Trump's own party hit back at the plans today as international investors voiced concern over the prospect of a trade war.
Speaker of the US House of Representatives Paul Ryan said the proposed tariffs were too broad
“Clearly there is over-capacity, dumping and trans-shipping of steel and aluminium by some countries, particularly China. But I think the smarter way to go is to make it more surgical and more targeted," he said.
US treasury secretary Steven Mnuchin meanwhile reiterated Trump's comments that Canada and Mexico would not be subject to the tariff if negotiations on the North American Free Trade Agreement were successful, adding that the US was "not looking to get into trade wars".