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ANALYSIS-Trump's trade tariffs: Long on rhetoric, short on impact?

WASHINGTON, March 5 (Reuters) - From Bush-era steel duties to the European Union's "bra wars" skirmish with China, global trade wars have often threatened but never quite gotten off the ground and President Donald Trump's planned steel and aluminum tariffs will likely play out the same way.

The steel tariffs were ruled illegal by the World Trade Organization in 2003 and the 2005 spat over Chinese brassiere exports, dubbed a "storm in a D-Cup" by Britain's media, was resolved in emergency talks between Brussels and Beijing. That is a pattern that could be repeated now, economists say.

While Trump has talked tough on trade since taking office in January 2017, he has little to show so far from his aggressive rhetoric.

He abandoned on his first day in office a 14-nation Pacific trade pact that stood no chance of passing Congress. Six months of talks to redraft the North American Free Trade Agreement have so far come to nothing despite frequent tweets that Trump would pull the trigger on the deal with Canada and Mexico that the president has dubbed a jobs killer.

That leaves steel and aluminum tariffs, quotas and levies on washing machines and duties on solar cells - small areas of the overall U.S. economy and its trade.

Investment bank Morgan Stanley calculates that taken together, steel, aluminum, washing machines and solar panels account for just 4.1 percent of U.S. imports. In terms of global trade, they are just 0.6 percent, the bank said.

Trump himself has gone from saying that "trade wars are good, and easy to win" on Friday, to a more soothing "I don't think you are going to have a trade war" by Monday.

Prospects of a global trade war hit financial markets hard last week, although by Monday, stock markets had recovered their poise.

"We don't think that the most severe scenario, (a) protectionist push becomes the most likely one," Morgan Stanley strategists Michael Zezas and Meredith Pickett said in a research note.

So far, reaction has been muted, with the European Union saying it will target politically sensitive goods in response. Those include Harley Davidson motorcycles, made in Wisconsin, the home state of Republican House of Representatives Speaker Paul Ryan.

Canada and Mexico, which would be among the countries hardest hit by Trump's proposed tariffs, have both said they will respond with counter-measures if necessary. 1/8nL2N1QN0KH

Inside the White House, there appeared to be room to modify the proposals, despite Trump's tough talk.

"The one thing that is very clear in this is that there is no language, there is no final language. There is no final plan, said one outside Trump adviser, who spoke on condition of anonymity and said formal action was unlikely this week.

"It's far from settled, it's far from done."

CHINA REMAINS THE TARGET

Even though China accounts for a tiny proportion of U.S. steel imports, it was viewed as the target for the tariffs. China's and India's industrial expansions have fueled massive overcapacity, hitting margins in the United States and Europe.

Under the administration of former Democratic U.S. President Barack Obama, action was taken in tandem with other partners to try to stem imports that undercut prices unfairly.

It is China's huge trade surplus with the United States that has attracted most of the Trump administration's ire. China ran a record $375.2 billion trade surplus with the United States in 2017 as the overall U.S. trade deficit surged 12 percent to $566 billion.

The very fact that the proposed steel and aluminum tariffs could be imposed on a global basis rather than specifically targeting one country means that the response across the globe is likely to be diffuse.

By contrast measures aimed directly at China could have a more damaging impact, specifically an investigation into intellectual property theft.

Trump has threatened a fine in dollars of "numbers that you hadn't even thought about" for China over the issue in a Reuters interview earlier this year, although the parameters of the investigation have not been disclosed and no date has been set for a decision.

U.S. industry charges that there have been losses worth hundreds of billions of dollars from stolen ideas and from being forced to turn over intellectual property as a cost of doing business in China.

"Separating China out from the crowd that is affected by current trade efforts could be taken as a material escalation," Zezas and Pickett said.

(Additional reporting by Jeff Mason, Steve Holland and Ayesha Rascoe; Editing by Peter Cooney)

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