THE ongoing trade war between the U.S., Canada and the European Union continues to roil the stock market. The war includes President Trump’s decision to impose huge tariffs on Canadian and EU steel and aluminum exports to the U.S. Trump initially threatened to impose an additional 25% in tariffs on these products on top of a 25% tariff already set to go into effect last Wednesday. But he backed down on this threat the day before after an agreement announced by Ontario Premier Doug Ford and U.S Commerce Secretary Howard Lutnick to suspend a planned 25% surcharge on electricity from Ontario sent to U.S. customers that Ford had warned he would impose.
The withdrawal of the surcharge came alongside an agreement to hold a meeting at the White House last Thursday to discuss a renewal of the trade agreement between the U.S. and Canada, the statement said. Trump’s announcement that he would double tariffs on Canadian steel and aluminum came after Ford threatened the electricity surcharge. Even with the new deal, the original 25% tariffs on steel and aluminum imports from all countries went into effect last Wednesday as planned. The U.S. imports more steel and aluminum from Canada than any other country.
Canada And The EU Retaliate
Canada and the EU quickly announced retaliatory tariffs in response to Trump’s move. Canada said it was imposing tariffs of $20.7 billion starting last Thursday on U.S. steel and aluminum products, as well as goods including computers, sports equipment and water heaters worth $9.9 billion. That is in addition to the 25% counter-tariffs on $20.8 billion of imports from the U.S. that were put in place on March 4 in response to other Trump import taxes that he has partially delayed by a month.
The EU announced its own counter-measures last Wednesday. European Commission President Ursula von der Leyen said that as the U.S. was applying tariffs worth $28 billion, the EU was responding with counter-measures worth 26 billion euros or about $28 billion. Those measures, which cover not just steel and aluminum products but also textiles, home appliances and agricultural goods, are due to take effect on April 1. In response, Trump on Thursday threatened to put a 200% tariff on all EU wine and champagne exports to the U.S.
Last week’s developments amplified concerns about tariffs that have roiled the stock market and stirred recession risks. The U.S. tariffs leave its trading partners with a difficult choice over retaliation, said The Wall Street Journal. Hitting back with tariffs against American products might act as a deterrent against further U.S levies or bring the Trump administration to the negotiating table. But they also risk doing further harm to trading partners’ own economies, said the WSJ.
Meanwhile, China retaliated against Trump’s additional 10% tariffs on all its exports to the U.S. by putting an additional 15% tariff on key U.S. farm products, including chicken, pork, soybeans and beef. The escalating trade tensions between the two countries punished the markets last Monday as investors fearful of the damage from Trump’s trade wars put their money elsewhere. In another development, Trump’s decision to not exempt Australia from U.S. tariffs on steel and aluminum has elevated red meat industry concerns in Australia about possible action against ag product imports into the US. After the White House confirmed that it is not granting Australia or any other nation an exemption from the tariffs, Australian Prime Minister Anthony Albanese said the 25% tariff decision on steel and aluminum was concerning and entirely unjustified.