President Donald Trump’s increased tariffs on all US steel and aluminum imports took effect on Wednesday, ratcheting up a global trade war and drawing swift retaliation from Canada and Europe.
Earlier, the European Commission said it would impose counter tariffs on up to 26 billion euros ($28 billion) worth of US goods next month.
Canada, the biggest foreign supplier of steel and aluminum to the United States, announced 25% retaliatory tariffs on those metals along with computers, sports equipment and other products worth C$29.8 billion in total. Canada’s central bank also cut interest rates to prepare the country’s economy for the damage.
Trump’s action to bulk up protections for American steel and aluminum producers restores effective tariffs of 25% on all imports of the metals and extends the duties to hundreds of downstream products, from nuts and bolts to bulldozer blades and soda cans.
US Commerce Secretary Howard Lutnick said nothing could stop the tariffs and Trump would impose trade protections on copper as well.
Trump’s hyper-focus on tariffs since taking office in January has rattled investor, consumer and business confidence in ways that economists worry could cause a US recession and slow the global economy.
European Commission President Ursula von der Leyen told reporters she had tasked Trade Commissioner Maros Sefcovic to resume talks with U.S officials on the matter.
“It is not in our common interest to burden our economies with such tariffs,” she said.
China’s foreign ministry said Beijing would safeguard its interests, while Japan’s Chief Cabinet Secretary Yoshimasa Hayashi said the move could have a major impact on US -Japan economic ties.
Close US allies Britain and Australia criticized the blanket tariffs, with Australian Prime Minister Anthony Albanese said the move was “against the spirit of our two nations’ enduring friendship.” However, both countries ruled out immediate tit-for-tat duties.
Brazil, the No. 2 provider of steel to the United States, said it would not immediately retaliate.
Dental floss to diamonds
The 27 countries of the EU are less impacted, for now. Germany’s Kiel Institute estimated a hit to EU output of only 0.02%, because “only a small fraction” of the targeted products are exported to the US
The EU’s counter-measures target goods like dental floss, diamonds, bathrobes and bourbon – which likewise account for a small portion of the giant EU-US commercial relationship. Still, the liquor industry warned they would be “devastating” on its sector.
US Trade Representative Jamieson Greer said the EU’s countermeasures “disregard the national security imperatives of the United States.”
With Wednesday’s tariff increase well flagged in advance, global stocks were barely changed on Wednesday, as data showing cooler US inflation.
But the back and forth on tariffs has left companies unnerved, and producers of sportswear, luxury cars and chemicals painted a gloomy picture of consumer and industrial health.
“Nearly everyone in the economy is struggling to comprehend wild swings in Washington policies, and their implications for everyday decisions,” said Stephen Dover, Franklin Templeton’s chief market strategist.
US steel producers welcomed Wednesday’s move, noting Trump’s 2018 tariffs had been weakened by numerous exemptions. The cost of aluminum and steel in the United States hovered near recent peaks.
JP Morgan’s chief economist forecast a 40% chance of a US recession this year and lasting damage to the country’s standing as a reliable investment destination if Trump undermines trust in U.S. governance.
A steep US stocks selloff in March has wiped out all of the gains notched by Wall Street following Trump’s election.
Frayed relations with Canada
The escalation of the US-Canada trade war occurred as Prime Minister Justin Trudeau prepares to hand over power to his successor Mark Carney, who won the leadership race of the ruling Liberals last weekend.
“I’m ready to sit down with President Trump at the appropriate time, under a position where there’s respect for Canadian sovereignty and we’re working for a common approach,” Carney said while touring a steel plant in Ontario.
Other Canadian officials are due to meet with US officials in Washington on Thursday.
Trump repeated on social media he wanted Canada as “our cherished Fifty First State.”
The normally close relationship between the two countries has frayed. The US national anthem has been booed at hockey games and some stores removed US products from their shelves, even before the duties took effect. Travelers are steering clear of the United States, with bookings down 20% from a year ago.
Trump on Tuesday threatened to double duties on Canadian steel and aluminum to 50% before backing off after Canada’s Ontario province suspended a move to impose a 25% surcharge on electricity exports to some US states.
Canada has built a commanding position in the US aluminum market thanks to cheap hydropower resources as US smelters once revived by Trump’s tariffs have been idled.
Canadian Energy Minister Jonathan Wilkinson told Reuters that Canada could impose non-tariff measures such as restricting oil exports to the US or levying export duties on minerals if US tariffs persist.
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