U.S. President Donald Trump's increased tariffs on all American steel and aluminum imports took effect on Wednesday, stepping up a campaign to reorder global trade in favor of the U.S. and prompting swift retaliation from Canada and Europe.
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.
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 U.S. recession and further lag on the global economy.
The European Commission, the executive arm of the European Union charged with coordinating trade matters, responded swiftly, saying it would impose counter-tariffs on up to 26 billion euros ($28 billion) worth of U.S. goods – often with more symbolic than economic impact – from next month.
Nevertheless, 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.
"We firmly believe that in a world fraught with geoeconomic and political uncertainties, it is not in our common interest to burden our economies with such tariffs," she said.
Canada, the biggest foreign supplier of steel and aluminum to the United States, will announce CA$29.8 billion ($20.71 billion) in retaliatory tariffs on Wednesday, a Canadian official who declined to be named said.
China's Foreign Ministry said Beijing would take all necessary measures to safeguard its rights and interests, while Japan's Chief Cabinet Secretary Yoshimasa Hayashi said the move could have a major impact on U.S.-Japan economic ties.
Close U.S. allies Canada, Britain and Australia criticized the blanket tariffs, with Australian Prime Minister Anthony Albanese saying the move was "against the spirit of our two nations' enduring friendship." However, he ruled out tit-for-tat duties, as did Britain.
The other countries most affected by the tariffs are Brazil, Mexico and South Korea, which all enjoyed some level of exemptions or quotas.
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 U.S.
The EU's own counter-measures – while impressively eclectic ranging from dental floss to diamonds and bathrobes to bourbon – only cover goods worth about six days' worth of trade in goods and services within the giant EU-U.S. commercial relationship.
France's Europe Minister Benjamin Haddad warned, however, that the EU could expand its response.
"For example, if it came to a situation where we had to go further, digital services or intellectual property could be included," he told TF-1 TV.
Trump initially threatened Canada with doubling the duty to 50% on its steel and aluminum exports to the U.S. but backed off after Canada's Ontario province suspended a move to impose a 25% surcharge on electricity exports to some U.S. states.
That incident whip-sawed U.S. financial markets already jittery over Trump's broad tariff offensive. With Wednesday's tariff increase well flagged in advance, Asian and European markets were broadly steady on Wednesday and U.S. stock index futures rose.
Companies such as Ford, General Motors, Howmet and Honeywell, which use steel and aluminum in their supply chains, were little changed in premarket trading.
Nonetheless, a steep U.S. stock selloff in March has wiped out all of the gains notched by Wall Street following Trump's election.
The back-and-forth U.S. tariff plans have left companies unnerved, upending industries from autos to energy.
"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.
Luxury carmaker Porsche said it was assessing how to pass the cost of tariffs on to consumers.
U.S. steel producers welcomed Wednesday's move, noting Trump's original 2018 tariffs had been weakened by numerous country- and product-specific exclusions.
"By closing loopholes in the tariff that have been exploited for years, President Trump will again supercharge a steel industry that stands ready to rebuild America," Steel Manufacturers Association President Philip Bell said.
The escalation of the U.S.-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.
Trump repeated on social media he wanted Canada as "our cherished Fifty First State."
Canadian Energy Minister Jonathan Wilkinson told Reuters that Canada could impose non-tariff measures such as restricting oil exports to the U.S. or levying export duties on minerals, if U.S. tariffs persist.
Canada, with ample hydropower resources that have made primary aluminum production more cost effective than in the U.S., has built a commanding position in the U.S. aluminum market, as U.S. smelters once revived by Trump's tariffs have been idled.
