Trade War Escalates: EU, Canada Retaliate Against Trump’s Tariffs

The EU and Canada retaliated against US President Donald Trump’s 25 per cent tariffs on steel and aluminium within hours of them taking effect, escalating a trade war that has rattled financial markets and threatened the global economy.

The European Commission said its measures would affect up to €26bn ($28bn) of American goods, matching the US tariffs on European exports, and would take effect in April, leaving some time to negotiate with Washington.

Commission president Ursula von der Leyen said the EU regretted Trump’s decision and that tariffs were “bad for business, and even worse for consumers”.

“These tariffs are disrupting supply chains. They bring uncertainty for the economy. Jobs are at stake. Prices will go up,” von der Leyen said.

Canada also hit back swiftly as Ottawa announced tariffs on almost C$30bn ($21bn) of US goods. Dominic LeBlanc, the country’s finance minister, branded the US levies as “completely unjustified, unfair and unreasonable”.

The retaliations came after the US tariffs came into force on Wednesday, as Trump pressed ahead with his protectionist trade agenda despite growing concern over the risk of a domestic recession.

The move to impose the tariffs followed a turbulent day on Wall Street as the spectre of a deepening trade war and the administration’s erratic policymaking on tariffs shook investors.

US and European stocks were up on Wednesday, snapping two days of declines, with the S&P 500 rising 0.8 per cent and the Stoxx Europe 600 climbing 0.8 per cent.

As part of its retaliation, Brussels has reinstated measures introduced during Trump’s first term on €4.5bn of US exports from April 1. These include levies of up to 50 per cent on products such as bourbon whiskey, jeans and Harley-Davidson motorcycles.

The EU has also drawn up levies on a further €18bn of US goods, which could include cosmetics, clothes, wood, soyabeans, chicken, beef and other agricultural produce. The measures, which could be expanded to include another €3.5bn of goods, require approval by EU countries and would come into force on April 13.

A senior EU official said soyabeans were on the list of targets because they were grown in Louisiana, the home state of House of Representatives Speaker Mike Johnson.

“We’re happy to buy our soyabeans from Brazil or Argentina,” they added.

“We want to ensure there is pressure within the American system to lift their tariffs,” a second official said, referring to efforts to hit goods from Republican states.

Trump’s tariffs are the latest salvo in an aggressive trade policy that the president has said will boost US manufacturing and penalise countries he claims have ripped America off.

Last month the president announced that he would impose the duties on metals, tearing up agreements struck between his predecessor Joe Biden and US trading partners to allow certain quantities of steel and aluminium to enter the country duty free.

US administration officials have framed the move as a response to “foreign players” that they say are responsible for “surging exports” of metals to America that are undermining domestic producers.

Trump has also expanded the metals tariffs to apply to a wide range of products containing steel and aluminium, including tennis rackets, exercise bikes, furniture and air conditioning units.

UK trade secretary Jonathan Reynolds said the tariffs were “disappointing” but Britain did not respond with immediate countermeasures.

Despite the US being the UK steel industry’s second-biggest export market, Reynolds said the government was “focused on a pragmatic approach” as it sought to negotiate a broader economic deal with the White House.

China, the world’s largest steelmaker and exporter, warned it would “take all necessary measures to safeguard its legitimate rights and interests” but did not immediately announce retaliatory tariffs.

Australian Prime Minister Anthony Albanese said the tariffs were “entirely unjustified”, adding: “This is not a friendly act.” The country was exempt from similar tariffs implemented during Trump’s first term, and the country’s steel producers supply the American defence and manufacturing sectors.

The full list of steel and aluminium products subject to the levies represented $151bn of imported goods in 2024, according to an analysis by Simon Evenett and Johannes Fritz of the St Gallen Endowment for Prosperity Through Trade.

Ted Murphy, a partner at law firm Sidley Austin, said Trump’s sweeping new metals tariffs represented a “big change” from his approach when he introduced similar levies in 2018 and allowed exclusions for some products.

“The product exclusions were vetted through a US government process to confirm the products weren’t available in the US,” said Murphy. “So taking that away will mean a lot of folks will have to pay the tariff because they can’t source these products domestically.”