Norwegian analysts and industrial players are among those claiming that US President Donald Trump’s trade war with China can have grave consequences for Norway’s economy as well. The country’s national industrial organization Norsk Industri warns that it also poses a major test of Norway’s own trade agreement with the European Union (EU).
“This is no bluff that’s going to just go away,” Knut E Sunde, director of Norsk Industri‘s sector and industrial policy division, told newspaper Dagens Næringsliv (DN) on Thursday. “Now it’s fired up so much that no one knows where this is going to end.”
Sunde also claimed that Norway has landed in the firing line, “and we have no place to hide, with the small, open economy we have.”
Not only did the trade war (rooted in the US’ new efforts to protect its own steel and aluminum industries) escalate dramatically this week when the US and China slapped high new import fees on an increasing number of each other’s products: The EU also has issued a notification with the surprising demand that all countries exporting steel to EU member nations, presumably including Norway, will be subject to an examination of whether they’ll be hit with new quotas or import duties on steel products.
That has deeply worried Norway’s large metals industry, which exports most of its products to the EU. Norwegian firms are already caught in Trump’s trade war after the US failed to include Norway in its initial lists of countries exempted from its new import duties on steel and aluminum, and because of the market uncertainty the trade war itself creates. State broadcaster NRK was reporting on Thursday that Trump’s newly appointed ambassador to Norway, Kenneth Braithwaite, would travel to Washington DC next week to discuss the lack of an exemption for Norway with US trade authorities. It has both surprised and upset the Norwegian government, which has long considered the US to be its most important ally and can’t understand why Norway is effectively being punished.
Now the EU’s demands leave them facing far more than indirect effects. Sunde, his colleagues at Norsk Industri and officials at Norway’s government ministry for business and trade ended up working during last week’s Easter holidays in an attempt to clarify the consequences of the EU’s response to what started as a trade war launched by the US against China.
“It wasn’t the Easter we had expected,” Sunde told DN. “There’s no doubt that this is serious and can have great, negative consequences for several dozen Norwegian industrial firms.”
DN reported how the EU’s new demand involves several hundred product categories. “It’s a lot of work just to chart which companies can be affected,” Sunde said. Many are major employers in outlying areas of Norway where they’re vitally important to the local economy.
He said a “serious meeting” was being held on Thursday between Norsk Industri and the high-ranking state secretaries of both the Norwegian trade and foreign ministries. “We have a short deadline to reply to the EU and this must be handled at a high level within both the foreign ministry and the prime minister’s office,” Sunde said. “We are extremely worried. What’s the next step? Is the government prepared?”
Trade Minister Torbjørn Røe Isaksen, who’ll be spending the weekend at his ruling Conservative Party’s annual national meeting, insists that government authorities are dealing actively with the issue, and at a high political level. “Even though it’s still possible to hope that we can avoid a full-scale trade war, what’s happening now is serious enough,” Isaksen told DN. “A small, open economy like ours needs a predictable framework (for international trade).”
Shares pounded, oil prices fell
Isaksen said he already experienced the uncertainty and nervousness of Norwegian companies at a meeting with businesses in Bergen on Wednesday, when stock markets around the world (including the Oslo Stock Exchange) took a new dive. Oslo’s main index fell another 1.34 percent on fears Trump’s trade war will have negative effects on business activity and drive up inflation. Oil prices also fell on Wednesday, always bad news for Norway’s oil-fueled economy.
Shares in some of Norway’s biggest industrial companies were also pounded, with Yara falling nearly 3 percent and Norsk Hydro, which is also facing huge problems at its aluminum refinery in Brazil, down by another 1.58 percent.
‘EØS’ agreement put to the test
Sunde claims the latest challenge from the EU will put Norway’s long-standing trade agreement with the EU (called the EØS/EEA-avtale) to the test. It provides Norway with full access to the EU’s inner market in return for billions of kroner worth of financial aid for struggling EU members and compliance with most all EU directives.
“We shouldn’t be affected by restrictions from the EU because we have the EØS-avtale,” Sunde said, “but what we see now poses a major test of the agreement. It will show whether it’s a fair-weather deal or can tolerate a storm.”
Isaksen downplayed Sunde’s concerns: “From our side, there’s all reason to believe that the EØS agreement will hold up, and that it’s not just a fair-weather deal,” the minister told DN. “It’s been a pillar of our cooperation with Europe since the early 1990s. I think it will manage also through a turbulent situation like this. Even though it’s a serious situation, we must not become resigned and expect that the worst will happen.”