The first shots of President Donald Trump’s global trade war have been fired.
Canada on Wednesday announced new retaliatory trade duties on some $21 billion worth of U.S. goods, a response to Trump implementing universal steel and aluminum tariffs.
Canada’s retaliatory measures follow ones announced Wednesday by the European Union targeting a range of U.S. goods worth $28 billion, including beef, motorcycles and whiskey alongside American-made steel and aluminum. China, too, signaled it was readying a response.
After weeks of threats and negotiations, the tariffs are among the first new, large-scale duties to actually be imposed by the countries, even as Trump has threatened many more. Besides supplemental duties totaling 20% on Chinese goods, Trump has suspended other menaced tariffs on Canada and Mexico.
The back-and-forth threatens to ignite a global trade war that could throttle economic growth prospects worldwide. The Trump administration has sought to downplay the immediate fallout from the trade volleys while also acknowledging there would be an economic “transition” or “detox” as the president implemented his policy goals.
So far, the consequences have been significant, at least as measured by markets. Broad stock indexes have now erased their post-electoral gains as investors rebel against the prospect of higher costs.
As the trade barbs flew Wednesday, stocks gave up earlier gains seen following a better-than-expected inflation report that appeared to offer short-term relief. Shares in U.S. automakers fell. In a note to clients Wednesday, analysts with Barclays financial services group noted that when Trump implemented similar duties, Ford and GM reported weaker profitability.
The tariff battle with Canada pits the U.S. against its biggest trading partner. America's northern neighbor is the largest foreign supplier of steel and aluminum to the U.S., and experts have warned Trump's duties would be passed on to consumers.
In a news conference Wednesday announcing the retaliatory duties, a Canadian government spokesman called Trump's tariffs "completely unjustified, unfair and unreasonable."
"The U.S. administration is once again inserting disruption and disorder into an incredibly successful trading partnership and raising the costs of everyday goods for Canadians and American households alike," said François-Philippe Champagne, Canada's minister of innovation, science and industry.
Canada's announcement comes despite a détente having been reached Tuesday with the Trump administration to resolve threats of a 25% surcharge on American consumers of Canadian electricity. Trump had threatened Canada with steel and aluminum tariffs climbing to 50% if the province of Ontario followed through on the surcharge.
The Trump administration has offered shifting rationales for the trade moves. In the case of the steel and aluminum tariffs, Trump has signaled the countries are taking advantage of the U.S. through their trade policies, something he says is reflected in America's yawning trade deficit.
Yet even as America's imports are at record levels, so are its exports. And some economists have argued that the tariffs are likely to threaten as many jobs as they might create, given the importance of accessing lower-priced, or specialized, raw steel and aluminum for American manufacturers of tractors or appliances.
Meanwhile, in the case of general trade duties that have been threatened — then suspended — on Canada and Mexico, the administration has also highlighted illicit fentanyl flows from those countries.
Yet last month, Trump stated a much more direct rationale for the tariffs onslaught.
"This is the beginning of making America rich again," the president said.
The Trump administration had not yet responded to the retaliatory measures announced Wednesday but has signaled it would respond in kind to any such moves.
