THE TRADE WAR IS HERE: Trump sets off a chain reaction with massive tariff announcements as countries vow to retaliate

justin Trudeau donald trumpCanadian Prime Minister Justin Trudeau and President Donald TrumpChip Somodevilla/Getty Images

  • President Donald announced Thursday that the US would impose new tariffs on steel and aluminum next week.
  • It set off a chain reaction, with Canada, members of the European Union, and others vowing to retaliate.
  • Increased protectionist trade actions push the US to the precipice of a global trade war.


President Donald Trump's Thursday announcement the US would impose new tariffs on imports of steel and aluminum set off a chain reaction, pushing the US to the precipice of a trade war as key allies vowed to retaliate.

Trump promised new tariffs, taxes on imports, of 25% on steel and 10% on aluminum. The president did not specify if any countries would be exempted, but the restrictions are expected to be wide-ranging.

The move came after an investigation into the national security risks of steel and aluminum imports by the Department of Commerce. The investigation, conducted under Section 232 of the Trade Expansion Act of 1962, is supposed to determine whether the US is too dependent on imports of a certain good in the event of a geopolitical incident requiring the US to default to its own production.

Several key allies attacked Trump's decision, saying their countries' imports posed no national security risk to the US because of political relationships.

Jean-Claude Juncker, the president of the European Commission, said the EU would "react firmly and commensurately to defend our interests" in a statement.

"We strongly regret this step, which appears to represent a blatant intervention to protect US domestic industry and not to be based on any national security justification," Juncker said. "Protectionism cannot be the answer to our common problem in the steel sector."

Chrystia Freeland, Canada's foreign minister, also sent out a swift response. Canada is the largest exporter of steel to the US and also is a major destination for US steel exports.

"It is entirely inappropriate to view any trade with Canada as a national security threat to the United States," Freeland said. "We will always stand up to Canadian workers and Canadian businesses. Should restrictions be imposed on Canadian steel and aluminum products, Canada will take responsive measures to defense its trade interests and workers."

The UK, on the other hand, took a more cautious approach in its response to the tariffs while expressing concern.

"We are engaging with the US on what this announcement means in practice. We have been clear that we are particularly concerned by any measures that would impact the UK steel and aluminum industries," a spokesperson for the UK Foreign Office said in a statement. "Overcapacity remains a significant global issue and we believe multilateral action is the only way to resolve it in all parties' interests."

In addition to US allies, China is said to be considering retaliatory measures, including tariffs on US imports of soybeans. Exports of soybeans from the US to China totaled over $12.4 billion last year, making them the top agricultural export to the country.

The swift blowback raised concerns that Trump's decision would place the US on the path to a trade war, with countries increasing trade restrictions in a tit-for-tat fight. Jan Hatzius, Goldman Sachs' chief economist, said that the risk of trade battles soared with the announcement.

"This is likely to escalate trade tensions, particularly as it looks likely to apply to a broad group of countries including to some allies of the US," Hatzius said in a note to clients. "We expect further disruptive trade developments over the coming months, including stalled NAFTA negotiations and potential restrictions on Chinese trade and investment."

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