The United States has implemented a 25% tariff on all steel and aluminum imports worldwide. In response, the European Union has announced plans to impose tariffs on American goods worth billions of dollars, raising concerns about a potential global trade war. President Donald Trump has already placed 25% tariffs on certain imports from Mexico and Canada—along with some exemptions—and a 20% levy on Chinese products. However, he opted not to increase the tariff on Canadian metal imports after initially threatening to do so hours earlier.
What Are Tariffs and How Do They Work?
Tariffs are taxes levied on goods imported from other countries. Companies that bring foreign goods into the U.S. are responsible for paying this tax to the government. Typically, tariffs are calculated as a percentage of a product's value. For instance, a 20% tariff on Chinese goods means that a product worth $10 incurs an additional $2 charge. Companies may choose to pass some or all of this cost onto customers. Historically, the U.S. has imposed lower tariffs compared to other countries. Trump's new tariffs—along with his promise to introduce additional "reciprocal" levies on goods from other nations—could lead to a significant increase in prices for consumers in the U.S. and elsewhere.
Why Is Trump Using Tariffs?
Tariffs are a central feature of Trump’s economic strategy. He argues that they will help boost U.S. manufacturing, protect jobs, increase tax revenue, and contribute to the growth of the domestic economy. Furthermore, he aims to restore America's trade balance with foreign partners, thereby narrowing the gap between U.S. imports and exports. However, he has not ruled out the possibility of a recession resulting from his trade policies, which prompted a decline in U.S. stock prices just before the metal tariffs took effect. U.S. Commerce Secretary Howard Lutnick later stated that the tariffs were "worth it" even if they led to an economic downturn. Initially, Trump's tariffs targeted goods from China, Mexico, and Canada, which together accounted for over 40% of U.S. imports in 2024. Trump has accused these three nations of failing to adequately address the flow of migrants and illegal drugs, such as fentanyl, into the U.S.—a claim that all three countries have denied. According to outgoing Canadian Prime Minister Justin Trudeau, Canada is responsible for less than 1% of the fentanyl entering the U.S., most of which comes from Mexico.
Potential Economic Turbulence and Voter Backlash
The tariffs pose a risk of economic instability and may provoke voter dissatisfaction. Faisal Islam noted that Trump seems unfazed by stock market fluctuations.
**Overview of Tariff Implementation and Global Reactions**
The 25% tariffs on steel and aluminum imports began on March 12. The U.S. is the largest importer of steel, with Canada, Brazil, and Mexico as its top three suppliers. Canada is also the leading supplier of aluminum to the U.S., providing nearly 60% of the total imports.
Initially, when Trump announced the tariffs on steel and aluminum imports, he claimed there would be no exceptions. However, on March 11, he threatened to double the levy on Canadian metals due to Canada’s decision to raise electricity charges for three northern U.S. states in retaliation for other U.S. tariffs. Trump ultimately abandoned this plan just hours before its implementation after Canada agreed to suspend the additional energy charges.
Following the imposition of the tariffs, the EU announced retaliatory measures on U.S. goods valued at €26 billion (£22 billion), set to begin on April 1 and fully implemented by April 13. These tariffs will target a range of products, from boats to bourbon, motorbikes, and certain steel and aluminum goods, including pipes, window frames, and tin foil. European Commission President Ursula von der Leyen expressed regret over these measures, stating that tariffs are "bad for business and worse for consumers."
Canada also declared a reciprocal 25% tariff on an additional C$29.8 billion ($20 billion; £16 billion) worth of U.S. goods, effective from March 13. Finance Minister Dominic LeBlanc indicated that this would encompass steel products valued at C$12.6 billion, along with sports equipment, computers, and cast iron items. He mentioned that further tariffs could follow if the U.S. expanded the steel and aluminum tariffs to products containing these metals.
China's foreign ministry announced that it would take "all necessary measures" to protect its rights and interests, arguing that the tariffs violate World Trade Organization rules. Meanwhile, Prime Minister Sir Keir Starmer stated that the UK would adopt a "pragmatic approach" to the U.S. tariffs as part of broader discussions with the Trump administration. He noted that negotiations for an economic deal, which would include tariffs if successful, were ongoing and emphasized keeping all options available.
Prior to these new measures, Trump had announced tariffs of 25% on steel and 10% on aluminum in 2018 during his first presidential term. Although he later negotiated exemptions for several countries, including Australia, Canada, and Mexico, those tariffs increased the average price of steel and aluminum in the U.S. by 2.4%.
