The News
The European Union on Wednesday announced new tariffs of 25% on $28 billion-worth of US exports, while Canada also unveiled new tariffs targeting some $21 billion in US goods. The retaliatory measures marked the latest escalations in the brewing trade war with Washington hours after US President Donald Trump’s 25% levy on all steel and aluminum imports went into effect.
China, the world’s largest steelmaker, also said it would “take all necessary measures to safeguard its legitimate rights and interests,” although Beijing is yet to detail any possible retaliatory actions.
The EU’s countermeasures, effective on April 1, cover bourbon whiskey, boats, and motorcycles. The bloc is planning another round of levies for later in that month. Canada’s new tariffs will also target some consumer goods, as well as US steel and aluminum exports — they are due to take effect Thursday.
It came after Canada and the US walked back an escalation in their trade dispute: US President Donald Trump rescinded a threat to double planned tariffs on Canadian steel and aluminum to 50%, while Ontario Premier Doug Ford canceled a planned tariff on electricity exports to three US states.
SIGNALS
A new transatlantic trade war is heating up
US President Donald Trump’s trade policy in his second term has gone far beyond the transatlantic “fight that blew up in his first term,” Politico noted. Trump imposed import duties on the European Union in 2018, but carved out exceptions for products that were unavailable in the US — this time, Trump has signaled far less openness to such exceptions. And Europe is taking a bolder approach: A senior EU official told the Financial Times that the bloc had decided to impose tariffs on soy beans, specifically, because they are grown in Louisiana, home state of Republican House of Representatives Speaker Mike Johnson. The UK, however, has not imposed counter-tariffs, as it seeks to negotiate a broader trade deal with the US.
US tariffs and countermeasures could hurt Canada and Europe
The tit-for-tat measures will come at a cost: The EU could lose up to 3.7 million tons of steel exports, according to the European Steel Association, an industry group. The trade war’s effects will be felt unevenly across the continent, a recent Oxford Economics report noted: “The EU’s two most valuable US goods exports, pharmaceuticals and automotives, are exposed,” meaning those sectors’ hubs, in cities like Copenhagen, Cork, and Stuttgart, could feel the greatest hit. Meanwhile, the governor of the Bank of Canada warned Wednesday of “a new crisis,” characterized by tariff-fueled inflation and slowed growth. Still, Canadians may be more willing to tolerate some pain, The Wall Street Journal noted: “Canadian nationalism real — and aggrieved.”
Tariffs may not resolve America’s trade, manufacturing issues
US President Donald Trump’s “tariffs seek to address a real challenge,” two experts at the Center for Strategic and International Studies argued: China subsidizes its metal industry, undercutting producers elsewhere. “But slapping unilateral tariffs on imports is like using a sledgehammer when we need a scalpel,” the experts wrote. The measures are unlikely to boost US steel and aluminum production, but “they will also cause many American companies pain,” The Economist wrote. Around 40% of the types of steel used to drill oil wells is imported to the US, for example. The new tariffs threaten to increase the cost of almost $150 billion-worth of derivative products made from these metals, Reuters noted.