President Donald Trump imposed sweeping 25% tariffs on steel and aluminum imports Wednesday, a move aimed at boosting U.S. manufacturing but one that has already drawn sharp retaliation from the European Union. The tariffs, which apply to all foreign producers, mark the administration's first broad-based tariff policy in Trump's second term, reversing exemptions granted to allies under his predecessor, Joe Biden.
The European Union responded within hours, announcing countermeasures on up to €26 billion ($28 billion) worth of American goods, including motorcycles, bourbon, and boats. The measures, set to take effect in April, were described as "swift and proportionate" by the European Commission. "Tariffs are taxes. They are bad for business, and even worse for consumers," European Commission President Ursula von der Leyen said in a statement. "These tariffs are disrupting supply chains. They bring uncertainty for the economy. Jobs are at stake. Prices will go up. In Europe and in the United States."
The EU's retaliation follows a pattern established in Trump's first term when similar tariffs led to reciprocal duties on U.S. exports. In 2018, when Trump imposed metals tariffs under Section 232 of the Trade Expansion Act, the EU hit back with levies on iconic American products, including Harley-Davidson motorcycles and Kentucky bourbon.
Trump defended his decision Wednesday, arguing that higher tariffs would encourage domestic manufacturing. "The higher it goes, the more likely it is they're going to build," Trump said at a Business Roundtable event, referring to U.S. manufacturers. "We will no longer allow foreign nations to take advantage of our workers."
The tariffs reignite concerns over rising costs for American businesses reliant on imported metals. The U.S. imported $31.3 billion worth of iron and steel and $27.4 billion of aluminum in 2023, according to the U.S. Commerce Department. Canada, the top supplier, shipped $11.4 billion in aluminum and $7.6 billion in iron and steel to the U.S. last year.
The move drew immediate criticism from U.S. industry leaders. William Oplinger, CEO of Alcoa, one of the largest U.S. aluminum producers, warned that the tariffs could cost 100,000 American jobs, including 20,000 in the aluminum industry. The International Trade Commission previously found that Trump's 2018 tariffs raised prices on key materials, leading to a $3 billion reduction in output for affected industries by 2021.
Phil Gibbs, an analyst at KeyBanc, noted that steel and aluminum spot prices surged in anticipation of the tariffs. "The price of domestic steel is up more than 30% in the last two months," Gibbs said. "The domestic price of aluminum has risen about 15%."
The automotive sector, which relies heavily on imported steel and aluminum, is expected to bear the brunt of price increases. Trump has suggested that his tariffs will "shut down" the Canadian auto industry, but industry analysts warn that they could also disrupt U.S. manufacturers, given the deeply integrated North American supply chain.
The EU is not the only trade partner pushing back against the U.S. tariffs. Australian Prime Minister Anthony Albanese criticized the move as "entirely unjustified" but stated that Australia would not impose retaliatory measures. "Tariffs and escalating trade tensions are a form of economic self-harm and a recipe for slower growth and higher inflation," Albanese said.
China, already subject to a 20% across-the-board tariff on its exports to the U.S., will see its steel and aluminum tariffs increase to 45% under Trump's latest action. However, China ships little steel directly to the U.S., with most of its exports entering through third countries or via rebranded shipments.
Despite these trade tensions, U.S. importers have adapted in the past. During Trump's first term, steel and aluminum buyers shifted to alternative suppliers, including South Korea, Brazil, and Mexico. However, this round of tariffs leaves fewer avenues for companies to circumvent higher costs, given the blanket coverage on all foreign steel and aluminum.
In a last-minute shift before the tariffs took effect, Trump backed off a plan to double the tariff rate for Canada after Ontario Premier Doug Ford agreed to pause electricity surcharges on U.S. customers. Discussions between U.S. Commerce Secretary Howard Lutnick, Ford, and Canadian Finance Minister Dominic LeBlanc are set to take place Thursday to renegotiate aspects of the United States-Mexico-Canada Agreement (USMCA).
