Donald Trump’s trade war has expanded to cover the world, with 25% tariffs on all steel and aluminium imports to the US in effect from today.
The duties were announced in mid-February as stock market investors cheered President Trump‘s ‘America first’ agenda which saw only Mexico, Canada and China come under initial pressure.
While two rounds of tariffs on China have been enacted, 25% duties on some Canadian and most Mexican cross-border trade have been withdrawn until 2 April at the earliest.
The tariffs beginning today are designed to protect US manufacturing and bolster jobs by making foreign-made products less attractive.
They threaten to make the cost of things like cars to soft drink cans – and therefore some drinks – more expensive.
Canada is the biggest exporter of both steel and aluminium to America. However, the US on Tuesday rowed back on a threat to double the charge on these metals to 50%.
The US tariffs are also a threat to UK steel exports – worth north of £350m annually – with the bulk of that value coming from stainless steel.
The UK government is yet to say how it will respond.
Any fall in demand among US customers will leave producers scrambling for new markets though some could be directed to domestic projects within the UK.
That steel could prove attractive as China, the world’s largest producer of steel, has threatened to limit its exports in response to the Trump tariffs.
They build on the regime initiated during Mr Trump’s first term which saw the European Union fire back with tariffs on products such as bourbon and jeans.
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The bloc has threatened to target those goods again as part of its response if Mr Trump follows through on his threat of an expansion of tariffs against the EU, currently expected on 2 April.
That date could be hugely important in the context of the Trump trade war.
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The president is under growing pressure to row back, particularly in his planned battle with nearest neighbours Mexico and Canada.
Markets have turned on the tariff regime, with jitters about the effects of higher import prices souring the US economy first being seen through the currency and bond markets.
The dollar has lost around five cents against both the pound and a resurgent euro alone in the past few weeks.
Stock markets have joined in, with the combined market value of the broad S&P 500’s constituent companies $4trn down on the peak seen just last month.
The big fear is that the protectionism will push the world’s largest economy into recession – a scenario Mr Trump did not deny was possible during a weekend interview.
US firms, already also grappling the complexities associated with an expanding tariff regime, are also letting it be known that they expect damage to their own businesses.
Delta Airlines lowered its first quarter growth forecast on the back of the turmoil this week while US firms are increasingly facing product boycotts.
Travel bodies have also reported a big drop in the number of Canadians crossing the US border, with road trips down by almost a quarter last month compared to February 2023 according to Statistics Canada.
