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US President Donald Trump said he would respond to the European Union’s retaliatory tariffs as a global trade war escalates. He did not specify how he would respond to the countermeasures but said: “Of course, I’m going to respond,” when asked by reporters at the White House on Wednesday. Trump threatened to double tariffs on Canadian steel and aluminum to 50% before retreating to a 25% rate after Ontario suspended the electricity surcharge to the US earlier in the day.

Responses from trading partners

Trump proceeded with the blanket 25% tariffs on steel and aluminum to other countries on Wednesday, prompting immediate countermeasures from the EU and Canada.

The EU hit back with import duties on €26 billion worth of American goods “matching the economic scope the US tariffs,” marking a major retaliatory action to the recent Trump administration’s tariff escalation. The commission will resume countermeasures from 2018 to 2020 during Trump’s first term against €8 billion worth of US goods on 1 April, followed by a new package of tariffs on €18 billion in mid-April.

In the statement, the European Commission said: “The Commission regrets the US decision to impose such tariffs, considering them unjustified, disruptive to transatlantic trade, and harmful to businesses and consumers, often resulting in higher prices.” It also added that “the EU remains ready to work with the US administration to find a negotiated solution,” and the countermeasures “can be reversed at any time should such a solution be found.”

Canada responded with 25% new tariffs on US-made goods worth C$30 billion (€19 billion) effective at midnight New York time on Thursday. The levies will be matching the US tariffs “dollar for dollar.” In total, the countermeasures will impact C$12.6 billion (€8.05 billion) of steel products, C$3 billion (€1.9 billion) of aluminum, and C$14.2 billion (€9.1 billion) on other items. Canada is the biggest steel exporter to the US, followed by Mexico, Brazil, and China in 2024.

Other countries did not take immediate countermeasures against Trump’s metal tariffs, but most expressed willingness for dialogue. The UK Prime Minister Keir Starmer said Britain will “keep all options on the table” and is “negotiating an economic deal which covers and will include tariffs if we succeed.” Australian Prime Minister Anthony Albanese said Trump’s tariffs are “entirely unjustified” and that Australia will continue discussions for an exemption. China did not respond directly to the new tariffs but stated the US “owed a big thank you” as Beijing had successfully controlled the fentanyl trade.

Global markets rebound

US stock markets rebounded despite the recent escalation in the global trade war following cooler-than-expected inflation data released on Wednesday. The S&P 500 rose about 0.5% after falling to near-correction territory this year, led by major technology stocks. The US dollar weakened against most currencies in the G-10 group on expectations that the Federal Reserve may cut interest rates sooner due to economic concerns.

However, analysts warned that the market bounce could be short-lived due to ongoing uncertainties. Michael Brown, a senior research analyst at Pepperstone, wrote in a note that he would continue selling into the equity rally, expecting gold to reach a new high due to the risk-off sentiment.

Nonetheless, the European stock markets continued to outperform global peers, driven by expectations of easing fiscal rules for defence spending. Ukrainian President Volodymyr Zelenskyy said that Ukraine had accepted a 30-day ceasefire deal with Russia, adding to the optimism regarding the bloc’s outlook. The euro fell slightly against the US dollar but remained at a four-month high of just under 1.09.

Asian markets were mixed in the early trading on Thursday, with Japan’s Nikkei 225 and South Korea’s Kospi rising, while Australia’s ASX 200 and China’s Hang Seng Index continued to decline.