WASHINGTON/BRUSSELS (Reuters) -President Donald Trump’s increased tariffs on all U.S. steel and aluminum imports took effect on Wednesday, stepping up a campaign to reorder global trade in favor of the U.S. and drawing 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.
U.S. Commerce Secretary Howard Lutnick said nothing could stop the tariffs and Trump would impose trade protections on copper as well.
Canada, the biggest foreign supplier of steel and aluminum to the United States, announced 25% retaliatory tariffs on goods including steel, aluminum, computers, sports equipment and other products worth C$29.8 billion in total.
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, 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 geo-economic and political uncertainties, it is not in our common interest to burden our economies with such tariffs,” she 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 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.
The other countries most affected by the tariffs are Brazil, Mexico and South Korea, which all enjoyed some level of exemptions or quotas.
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 U.S.
The EU’s own counter-measures include dental floss, diamonds, bathrobes and bourbon – goods that likewise account for a small portion of the giant EU-U.S. commercial relationship.
France’s Europe Minister Benjamin Haddad warned, however, that the EU could expand its response to include digital services or intellectual property.
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.
Lutnick told Fox Business Network he plans to meet with Ontario Premier Doug Ford to “lower the temperature,” but will wait for Mark Carney to be installed as Canadian prime minister to negotiate on trade on a national level.
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. stocks opened higher after data showed cooling inflation.
Nonetheless, a steep U.S. stocks selloff in March has wiped out all of the gains notched by Wall Street following Trump’s election.
The back-and-forth on tariffs has 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 2018 tariffs had been weakened by numerous exemptions.
“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.
CANADIAN ALUMINUM SUPPLIES
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 has built a commanding position in the U.S. aluminum market thanks to cheap hydropower resources as U.S. smelters once revived by Trump’s tariffs have been idled.
(Reporting by David Lawder; additional reporting by Philip Blenkinsop in Brussels, Andrea Shalal in Washington, Mark John in London, David Ljunggren in Ottawa, Jarrett Renshaw and Arathy Somasekhar in Houston, Shubham Kalia and Gnaneshwar Rajan in Bengaluru and Renju Jose in Sydney; Writing by Andy Sullivan; Editing by Lincoln Feast, Christina Fincher and Toby Chopra)
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