Canada threatens retaliation as Trump doubles metal tariffs; EU pushes for trade breakthrough

In a move that risks reigniting global trade tensions, Canada is preparing retaliatory measures in response to the United States doubling tariffs on steel and aluminium imports.

Meanwhile, the European Union is attempting to make diplomatic headway with Washington, even as European industry reels from the fallout. The developments come as US President Donald Trump’s administration ramps up pressure on trade partners, asking for “best offers” to avoid broader tariff escalations in July.

Canada hits back

Canada, one of the United States’ top trading partners, is facing the brunt of Trump’s tariff hike. According to US Census Bureau data, Canada exports more aluminium to the US than the rest of the top 10 suppliers combined, making it particularly vulnerable to the new levies.

The revised tariffs, which came into effect on June 4, raise duties on steel and aluminium imports from 25 per cent to 50 per cent.

In a statement cited by Reuters, Canadian Prime Minister Mark Carney’s office said the country was “engaged in intensive and live negotiations to have these and other tariffs removed.” But the government is also preparing reciprocal measures should the talks fail to yield results.

The impact of these tariffs is already being felt. Austrian steelmaker Voestalpine warned that the new duties could hit its earnings, while German steel lobby group WSM expressed concern that EU suppliers might be squeezed out of US markets altogether. “Nobody has the margins to absorb these bottomless tariffs,” WSM Managing Director Christian Vietmeyer told Reuters.

EU optimistic but concerned over steel tariffs

Despite rising tensions, the European Union remains cautiously optimistic about trade talks with the US. On Wednesday, EU trade commissioner Maros Sefcovic met with US Trade Representative Jamieson Greer in Paris and reported “concrete progress” in negotiations, as per Reuters.

“We both concluded that we are advancing in the right direction, at pace,” Sefcovic told Reuters, adding that high-level talks will follow ongoing technical discussions in Washington. However, he also criticised the tariff hike, saying it does not contribute positively to the dialogue.

Sefcovic said the EU and US share a common challenge of steel overcapacity and should be working together rather than implementing unilateral measures. European businesses have echoed this sentiment, calling on the EU to do everything in its power to resolve what they describe as a customs conflict.

The EU has not yet received a formal letter from the US requesting specific proposals, unlike other trading partners.

Trump doubles down on metal tariffs

President Trump signed an executive proclamation on Wednesday, doubling existing tariffs on steel and aluminium imports from 25 per cent to 50 per cent. The new rate applies to nearly all trading partners except the United Kingdom, which has reached a preliminary trade deal with Washington during the ongoing 90-day pause on broader Trump tariffs.

The White House expects countries to submit their “best offers” across various sectors, including quotas and tariff proposals for US exports, by early July to avoid further retaliatory measures.

According to a Reuters report, Washington has promised to respond “within days” with details of possible exemptions or reductions if satisfactory offers are made.

British Prime Minister Keir Starmer expressed confidence that tariffs on UK steel would be reduced to zero within a few weeks, suggesting that negotiations between London and Washington are progressing well.

Industry fallout spreads

The tariff shock is already rippling through global supply chains. French spirits group Rémy Cointreau reportedly abandoned its 2030 sales growth targets, citing US tariffs, slower American sales, and overall economic uncertainty as key factors.

In the metals sector, aluminium price premiums have surged as markets brace for reduced supply and continued demand. With limited domestic production capacity, the US is likely to maintain current import volumes unless prices spike enough to suppress consumption.

Meanwhile, Mexico’s Economy Minister Marcelo Ebrard criticised the new duties, calling them “unsustainable and unfair,” particularly since Mexico imports more steel from the US than it exports there.

Beyond metals, trade friction with China is also complicating matters. Auto manufacturers in the US and Europe are facing potential production slowdowns due to China’s export restrictions on rare earth magnets and minerals, which are vital for electric vehicles and other components.

As Reuters reported, both German and US firms are warning of supply chain disruptions due to the Chinese curbs, which many see as retaliation for Trump’s tariffs.

What lies ahead

With the July 8 deadline approaching for Trump’s “reciprocal” tariffs to take effect, the global trade landscape remains volatile. Canada’s pushback, EU’s cautious optimism, and industry-wide uncertainty underscore the stakes involved.

As negotiations intensify, the world will be watching to see whether diplomacy can prevail or whether another full-scale trade war is on the horizon.