Just hours after Trump’s 25% duties on all US steel and aluminium imports took effect, Trump said he would impose additional penalties if the EU follows through with its plan to enact counter tariffs on some US goods next month.
“Whatever they charge us, we’re charging them,” Trump told reporters at the White House on Wednesday.
Trump’s hyper-focus on tariffs has rattled investor, consumer and business confidence and raised recession fears. He has also frayed relations with Canada, a close ally and major trading partner, by repeatedly threatening to annex the neighbouring country.
Canada, the biggest foreign supplier of steel and aluminium to the United States, announced 25% retaliatory tariffs on those metals along with computers, sports equipment and other products worth $US20 billion ($NZ34.8 billion) in total. Canada has already imposed tariffs worth a similar amount on US goods in response to broader tariffs by Trump.
“We will not stand idly by while our iconic steel and aluminium industries are being unfairly targeted,” Canada’s Finance Minister Dominic LeBlanc said.
Canada’s central bank also cut interest rates to prepare the country’s economy for disruption.
Trump’s action to bulk up protections for American steel and aluminium 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 Trump would impose trade protections on copper as well.
A Reuters/Ipsos poll found 57% of Americans think Trump is being too erratic in his effort to shake up the US economy, and 70% expect that the tariffs will make regular purchases more expensive.
EU LESS EXPOSED
The 27 countries of the European Union are less exposed, as only a “small fraction” of targeted products are exported to the United States, according to Germany’s Kiel Institute.
The EU’s counter-measures, due to take effect next month, would target up to $US28 billion worth of US 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.
Nevertheless, Commission President Ursula von der Leyen said the bloc will resume talks with US officials.
“It is not in our common interest to burden our economies with such tariffs.”
At the White House, Trump said he would “of course” respond with further tariffs if the EU followed through on its plan. With Irish Prime Minister Micheal Martin at his side, Trump criticised the EU member country for luring away US pharmaceutical companies.
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, but ruled out immediate tit-for-tat duties.
Brazil, the No 2 provider of steel to the United States, said it would not immediately retaliate.
STOCKS STEADY, COMPANIES SPOOKED
With Wednesday’s tariff increase well flagged in advance, global stocks were barely changed on Wednesday.
But the back and forth on tariffs has left companies unnerved, and producers of luxury cars and chemicals painted a gloomy picture of consumer and industrial health. More than 900 of the 1500 largest US companies have mentioned tariffs on earnings calls or at investor events this year, according to LSEG data.
“We are in a trade war and when a trade war begins, it tends to sustain itself and feed itself,” Airbus CEO Guillaume Faury said on French television.
Shares in German sportswear maker Puma lost almost a quarter of their value after earnings underscored concerns that trade concerns are curbing American spending.
US steel producers welcomed Wednesday’s move, noting Trump’s 2018 tariffs had been weakened by numerous exemptions. The cost of aluminium 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 US 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.
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.
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.
