President Donald Trump announced on Thursday (31 May) that the United States would slap tariffs on steel and aluminium from the EU, Canada and Mexico, prompting Europe to say it would respond with “counterbalancing measures within hours” in what amounts to a trade war with Washington.

US Secretary of Commerce Wilbur Ross said the administration had decided not to grant a permanent exemption to the Europeans, Canada and Mexico. As a result, steel and aluminium exports from these partners to the US would suffer duties of 25% and 10% respectively.

Other countries including Argentina and Brasil accepted to limit their exports. A quota on exports was discussed between the Commission and the US negotiation teams over the past weeks but was eventually discarded by the EU leaders.

Top EU officials have made clear in recent weeks they see relations with the US and its maverick, protectionist president as the biggest challenge for the bloc.

Juncker announces “counterbalancing measures in the next hours”

Following the announcement, European Commission President Jean-Claude Juncker said the EU would announce “counterbalancing measures in the next hours” and would also present a settlement dispute at the World Trade Organisation.

Juncker said the tariffs were “totally unacceptable”. “This is protectionism, pure and simple,” he added.

The Commission will activate countermeasures that would hit US exports worth a total of €6 billion. The list of products affected, approved when Trump first announced the tariffs in April, includes American hallmark products such as Levi’s jeans, Harley Davidson motorbikes, or exports coming from the constituencies of key Republican figures, such as bourbon whiskey.

Trump said the tariffs were imposed on the grounds of national security, as the dumping of steel forced the closure of factories and led to job losses.

But Europe argued that imposing tariffs on allies was not the solution to steel overcapacity.

Ross stressed yesterday that “the president’s overwhelming objective is to reduce our trade deficit,” totalling €120 billion with Europe.

EU leaders offered to start trade talks with the US Administration, but only after Trump granted a permanent exemption on the tariffs. As part of the proposal, the Europeans were ready to discuss market access of industrial products, including cars.

But Juncker insisted again on Thursday that “the EU will not negotiate under threat.”

“The US has sought to use the threat of trade restrictions as leverage to obtain concessions from the EU,” said Trade Commissioner Cecilia Malmström.

“This is not the way we do business, and certainly not between longstanding partners, friends and allies,” she added in a statement.

The trade war between the EU and the US, the world’s largest economic blocs, started as market turbulence returned to the eurozone with the political crisis in Italy, where the Five Star Movement and Lega’s coalition agreement put the country on a collision course with the EU.

Trump’s decision to slap tariffs on his allies was criticised by companies on both sides of the Atlantic.

Eurofer, the European Steel Association, called Trump’s measure “naked protectionism”.

“Today is a bad day for the world trade system”, said Axel Eggert, director general of Eurofer. “However, what’s done is done. The EU thus needs to act swiftly in its own interest to defend the internal market from the impact of steel deflected from the US border to the largest open steel market in the world: Europe’s” Eggert said.

The American Chamber of Commerce to the EU said that “we are very concerned by the damage a tit-for-tat dispute would cause to the transatlantic economy”.

The organisation representing US companies in Europe said that the EU had met all the criteria for a permanent exemption and warned that the decision puts “the global trading system at risk”.

BusinessEurope, a private sector organisation, said the EU “should have a proportionate reaction to effectively defend its rights in a WTO-conform way,” its director general Markus J. Beyrer commented

“Global trade is currently under high pressure and companies are suffering the most from uncertainty and market volatility,” he said.