The United States has implemented a 25% tariff on steel and aluminum imports from across the globe.
In response, Canada and the European Union (EU) have introduced tariffs on American goods worth billions of dollars, heightening concerns about a potential global trade war.
President Donald Trump has threatened to impose a 200% tariff on alcohol imports from EU countries unless the bloc removes its “nasty 50% tariff on whisky.”
Additionally, Trump has already imposed 25% tariffs on various imports from Mexico and Canada, with some exceptions, as well as a 20% levy on goods from China.
Understanding Tariffs and Their Impact
Tariffs are taxes applied to goods imported from foreign countries.
Importing companies pay these taxes to the government.
Tariffs are usually calculated as a percentage of a product’s value. For example, a 20% tariff on Chinese goods means that an item valued at $10 (£7.76) incurs an additional $2 charge.
Businesses may choose to pass on some or all of the tariff costs to consumers.
Historically, the U.S. has maintained lower tariffs on imported goods than many other nations.
However, economists fear that Trump’s new tariffs, along with additional levies he has suggested could take effect on April 2, may drive up consumer prices both in the U.S. and globally.
Trump’s Justification for Tariffs
Tariffs play a key role in Trump’s economic strategy.
He argues that they will strengthen U.S. manufacturing, safeguard jobs, generate tax revenue, and stimulate domestic economic growth.
He also aims to correct America’s trade imbalance by reducing the gap between imports and exports with specific countries.
Despite this, Trump has not ruled out the possibility of a recession resulting from his trade policies, which led to a sharp decline in U.S. stock markets just before the metal tariffs took effect.
U.S. Commerce Secretary Howard Lutnick later defended the tariffs, stating that they were “worth it” even if they contributed to an economic downturn.
Trump initially targeted Chinese, Mexican, and Canadian imports with tariffs.
These three countries accounted for over 40% of all U.S. imports in 2024.
However, Trump has accused them of failing to do enough to curb the influx of migrants and illegal drugs, such as fentanyl, into the U.S.
All three nations have rejected these allegations.
How the Steel and Aluminum Tariffs Work
The U.S. implemented a 25% tariff on all steel and aluminum imports on March 12.
The U.S. is the world’s largest steel importer, with Canada, Brazil, and Mexico being its top suppliers.
Canada also supplies nearly 60% of all aluminum imported by the U.S.
Initially, Trump announced that there would be no exemptions to the steel and aluminum tariffs.
On March 11, he threatened to double tariffs on Canadian metals due to Canada’s decision to impose higher electricity charges on customers in three northern U.S. states in response to earlier U.S. tariffs.
However, Trump withdrew this plan just before it was set to take effect, as Canada agreed to suspend the extra energy charges.
During his first term in office, Trump had previously imposed 25% tariffs on steel and 10% on aluminum in 2018.
However, he later negotiated exemptions for several countries, including Australia, Canada, and Mexico.
Despite these exemptions, the U.S. International Trade Commission reported that tariffs raised the average price of steel and aluminum in the country by 2.4% and 1.6%, respectively.
Global Reactions to the Steel Tariffs
Within hours of the U.S. tariffs taking effect, Canada and the EU announced countermeasures.
Canada introduced a 25% tariff on an additional C$29.8 billion ($20 billion; £16 billion) worth of U.S. goods starting on March 13.
These tariffs include steel products valued at C$12.6 billion, along with sports equipment, computers, and cast iron items.
The EU’s retaliatory tariffs, set to take effect on April 1 and be fully implemented by April 13, target U.S. goods worth €26 billion (£22 billion).
The list of affected items includes “boats, bourbon, motorbikes,” as well as steel and aluminum products such as pipes, window frames, and tin foil.
European Commission President Ursula von der Leyen expressed regret over the measure, stating, “Tariffs are bad for business and worse for consumers.”
Trump, responding on his social media platform Truth Social, warned that if the EU did not remove its 50% tariff on American whiskey “immediately,” the U.S. would impose a 200% tariff on “all wines, Champagnes, and alcoholic products coming out of EU-represented countries.”
“This will be great for the Wine and Champagne businesses in the U.S.,” he added.
The UK, which exports significant amounts of steel to the U.S. each year, has taken a cautious stance.
Prime Minister Sir Keir Starmer told lawmakers that the UK would adopt a “pragmatic approach” but stated that it would “keep all options on the table.”
China’s foreign ministry vowed to take “all necessary measures” to protect its interests, asserting that the U.S. tariffs violated World Trade Organization rules.
Tariffs on Canadian and Mexican Goods
Trump has already implemented 25% tariffs on other goods from Canada and Mexico.
Originally set to take effect on February 4, these tariffs were delayed for a month to allow negotiations. They were officially implemented on March 4, alongside a 10% tariff on Canadian energy exports.
On March 5, Trump announced a one-month exemption for North American-made cars that comply with the United States-Mexico-Canada Agreement (USMCA).
This trade pact, negotiated by Trump during his first term, establishes rules on how much of a vehicle must be produced within North America to qualify for tariff-free treatment.
The auto industry had warned that tariffs on Canadian and Mexican goods could have significant consequences, as vehicle components frequently cross borders multiple times before assembly.
After Trump’s exemption announcement, shares in major U.S. automakers surged.
On March 6, Trump expanded the exemption to cover other goods covered by USMCA, including televisions, air conditioners, avocados, and beef.
Additionally, Trump reduced tariffs on potash, a key fertilizer ingredient, from 25% to 10%.
Canada’s Response to the Additional Tariffs
Outgoing Canadian Prime Minister Justin Trudeau accused Trump of attempting “a total collapse of the Canadian economy [to] make it easier to annex us.”
He announced immediate retaliatory tariffs on C$30 billion ($21 billion; £16 billion) worth of U.S. imports, with plans for further measures totaling C$125 billion within three weeks.
However, after Trump granted additional exemptions, Canada delayed the second phase of tariffs.
Trudeau’s successor, Mark Carney, also criticized the tariffs as “unjustified” and stated, “In trade, as in hockey, Canada will win.”
Ontario Premier Doug Ford initially planned to impose a 25% surcharge on electricity exports to three U.S. states—Michigan, New York, and Minnesota—in retaliation.
However, these plans were shelved after Trump threatened to double tariffs on Canadian steel and aluminum.
Mexico’s Response
Mexico postponed its retaliatory tariffs during the initial negotiation period.
President Claudia Sheinbaum urged calm, stating that “cooler heads will prevail” despite Trump’s actions.
She also agreed to deploy 10,000 troops along the U.S.-Mexico border to curb smuggling.
Following the implementation of tariffs on March 4, Sheinbaum declared them “unjustified” and promised a response involving “tariff and non-tariff measures.”
Before these countermeasures could be announced, Trump unveiled exemptions for carmakers and other goods, which Sheinbaum welcomed.
While Trump has been critical of Trudeau, he has praised Sheinbaum, describing their relationship as “very good.”
China’s Retaliatory Measures
A 10% tariff on all Chinese imports to the U.S. began on February 4.
Trump later announced an exemption for shipments valued under $800.
On February 10, China responded with tariffs of 10-15% on select U.S. agricultural products and imposed export controls on American aviation, defense, and tech firms.
The U.S. tariff doubled to 20% on March 4.
China urged the U.S. to resume negotiations, warning that if America continued a trade war, China would “fight them to the bitter end,” according to foreign ministry spokesperson Lin Jian.