March 2, 2018 / 2:28 PM / a year ago

UPDATE 1-Europe's firm response to stop short of trade war with Trump

* EU refers to WTO complaint, safeguard measures

* Safeguards measures target product, not single country

* EU sees itself as open-market counterweight to U.S. under Trump (Adds Le Maire, German steelmakers, more from Eurofer)

By Philip Blenkinsop

BRUSSELS, March 2 (Reuters) - The firm response that Europe has pledged to planned U.S. tariffs on steel and aluminium imports is likely to stop short of triggering the trade war that open market supporters fear.

President Donald Trump said on Thursday that the United States would apply duties of 25 percent on imported steel and 10 percent on aluminium to protect U.S. producers.

The European Commission called the step a blatant intervention that amounted to protectionism. However, while promising to act firmly, it made no mention of retaliation but instead spoke of counter-measures that conformed to World Trade Organization (WTO) rules.

French Finance Minister Bruno Le Maire told reporters that "all options are on the table", including counter-measures to limit U.S. imports to Europe.

Trump tweeted on Friday that he did not fear a trade war.

"When a country (USA) is losing many billions of dollars on trade with virtually every country it does business with, trade wars are good, and easy to win," his tweet read. "Example, when we are down $100 billion with a certain country and they get cute, don't trade anymore-we win big. It's easy!"

Brussels will join other countries in challenging the measures at the WTO and says it will also look into safeguards.

Safeguard measures - last deployed in 2002 in response to steel import duties set by then U.S. President George W. Bush - would be designed to guard against a flood of imports being diverted to Europe due to the U.S. tariffs, which are likely to be formally announced next week.

However, they would have to apply to all countries, not just the United States, and so would hit exports from China, India, Russia, South Korea and Turkey. U.S. steel makes up less than 1 percent of EU steel imports.

The European Union sees itself as a global counterweight to a protectionist-leaning Trump, sealing a trade deal with Japan, which had been part of a planned trans-Pacific trade alliance Trump withdrew from on his first day in office.

The EU is also seeking to conclude free trade deals with Mexico, now in talks with the United States to save the North American Free Trade Agreement (NAFTA), and the Mercosur countries Argentina, Brazil, Paraguay and Uruguay.

Retaliation would go against its long-standing message that global trade should be free - as well as fair.

Data from European steel association Eurofer shows the United States was the destination of about 15 percent of Europe's steel exports in 2017, second behind Turkey with a 20 percent share.

The 3.4 million tonnes crossing the Atlantic to the United States is about 2 percent of EU steel production. Including tubes, the figure is 5 million tonnes, which Eurofer warned could be cut in half by the U.S. measures.

Europe is the biggest exporter of steel to the United States. Germany's statistics office valued this business at $6.8 billion in 2017 - about 20 percent of all U.S. steel imports.

A Eurofer official said most EU producers sent higher value steel, such as for cars or special beams, for which U.S. producers alone could not meet domestic demand.

German engineering trade association VDMA said the spiral of countermeasures could lead to a global trade war.

German steelmakers exported nearly 1 million tonnes of rolled steel to the United States in 2017. The two largest, ThyssenKrupp and Salzgitter, declined to comment, but German steel trader Kloeckner & Co said it would not be affected as all its steel in the United States comes from local manufacturers.

ArcelorMittal, the world's biggest steelmaker with sizeable European and U.S. operations, said it was assessing the likely impact, although it said that governments were right to take a tough approach to unfair trade.

Turkey's steel exporters' association said it did not expect a major impact on their exports to the United States. They make up more than 5 percent of U.S. steel imports.

Analysts from Jefferies said the actual measures announced next week could be more nuanced than an across-the-board 25 percent tariff for steel.

Europe, they said, was likely to respond quickly with safeguard measures - it took just 20 days to act in 2002 - and EU producers could secure more open access to the United States than rivals.

BSC analysts said the short-term impact for Russian steel stocks should be limited and the measures were a "zero issue" for aluminium producer Rusal, which could easily send its products elsewhere. (Reporting by Philip Blenkinsop, Ceyda Caglayan in Istanbul, Robert-Jan Bartunek in Brussels, Sujata Rao-Coverley in London, Polina Devitt in Moscow, Christoph Steitz in Frankfurt, Tom Kaeckenhoff in Duesseldorf, Myrian Rivet in Paris; Editing by Angus MacSwan)

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