Action could soften the blow amid threats of retaliation by trading partners and dire economic warnings from lawmakers and businesses

The Associated Press

WASHINGTON — The White House said Wednesday that Mexico, Canada and other countries may be spared from President Donald Trump’s planned steel and aluminum tariffs under national security “carve-outs,” a move that could soften the blow amid threats of retaliation by trading partners and dire economic warnings from lawmakers and business groups.

Press secretary Sarah Huckabee Sanders told reporters the exemptions would be made on a “case by case” and “country by country” basis, a reversal from the policy articulated by the White House just days ago that there would be no exemptions from Trump’s plan.

The announcement came as congressional Republicans and business groups braced for the impact of expected tariffs of 25 percent on imported steel and 10 percent on aluminum, appearing resigned to additional protectionist trade actions as Trump signaled upcoming economic battles with China.

The looming departure of White House economic adviser Gary Cohn, a former Goldman Sachs executive who has opposed the promised tariffs, set off anxiety among business leaders and investors worried about a potential trade war.

The White House said Trump was expected to make a final announcement by the end of the week and officials were working to include language in the tariffs that would give Trump the flexibility to approve exemptions for certain countries.

“He’s already indicated a degree of flexibility, I think a very sensible, very balanced degree of flexibility,” Commerce Secretary Wilbur Ross told CNBC. “We’re not trying to blow up the world.”

Trump signaled other trade actions could be in the works. In a tweet, he said the “U.S. is acting swiftly on Intellectual Property theft.” A White House official said Trump was referencing an ongoing investigation of China in which the U.S. trade representative is studying whether Chinese intellectual property rules are “unreasonable or discriminatory” to American business.

The official, who spoke on the condition of anonymity to discuss internal deliberations, said an announcement on the findings of the report — and possible retaliatory actions — was expected within the next three weeks.

Business leaders, meanwhile, continued to sound the alarm about the potential economic fallout from tariffs, with the president and CEO of the U.S. Chamber of Commerce raising the specter of a global trade war. That scenario, Tom Donohue said, would endanger the economic momentum from the GOP tax cuts and Trump’s rollback of regulations.

“We urge the administration to take this risk seriously,” Donohue said.

The president has said the tariffs are needed to reinforce lagging American steel and aluminum industries and protect national security. He has tried to use the tariffs as leverage in ongoing talks to revise the North American Free Trade Agreement, suggesting Canada and Mexico might be exempted from tariffs if they offer more favorable terms under NAFTA.

Lawmakers opposed to the tariffs, including House Speaker Paul Ryan and Senate Majority Leader Mitch McConnell, have suggested more narrowly focused approaches to target Chinese imports. But members of Congress have few tools at their disposal to counter the president, who has vowed to fulfill his campaign pledge.

“I don’t think the president is going to be easily deterred,” said Sen. John Cornyn, R-Texas, who has suggested hearings on the tariffs.

Sen. Lamar Alexander, R-Tenn., said Trump had listened to him and others who disagree with the direction of the trade policies. “I thank him for that and he’s been a good listener. The difficulty is so far I haven’t persuaded him,” Alexander said.

Republicans in Congress have lobbied administration officials to reconsider the plan and focus the trade actions on China, warning that allies such as Canada and members of the European Union would retaliate.

The EU said it was prepared to respond to any tariffs with counter-measures against U.S. products such as Harley-Davidson motorcycles, Levi’s jeans and bourbon. EU Trade Commissioner Cecilia Malmstroem said the EU was circulating among member states a list of U.S. goods to target with tariffs so it could respond quickly.

The president plans to rally Republicans in western Pennsylvania on Saturday in support of Rick Saccone, who faces Democrat Conor Lamb in a March 13 special House election. Trump has told associates the tariffs could be helpful to the GOP cause in the election in the heart of steel country.