Canada and Mexico retaliated on Thursday after Washington imposed tariffs on steel and aluminum imports while the European Union had its own reprisals ready to go, reviving investor fears of a global trade war. Germany’s Economy Minister said early on Friday the EU might look to coordinate its response with Canada and Mexico. The tariffs, announced by Commerce Secretary Wilbur Ross, ended months of uncertainty about potential exemptions and suggested a hardening of the U.S. approach to trade negotiations. The measures, touted by President Donald Trump in March, drew condemnation from Republican lawmakers and the country’s main business lobbying group and sent a chill through financial markets. The Dow Jones Industrial Average lost 1 percent and the S&P 500 shed 0.69 per cent. Shares of industrial heavyweights Boeing and Caterpillar both fell, with Boeing down 1.7 percent and Caterpillar down 2.3 per cent. European shares opened higher, however. Tariffs of 25 per cent on steel imports and 10 per cent on aluminum were due to be imposed on the EU, Canada and Mexico from midnight (0400 GMT on Friday), Ross told reporters. “We look forward to continued negotiations, both with Canada and Mexico on the one hand, and with the European Commission on the other hand, because there are other issues that we also need to get resolved,” he said. Canada and Mexico, embroiled in talks with the United States to modernize the North American Free Trade Agreement (NAFTA), responded swiftly and German Economy Minister Peter Altmaier said the EU might team up with them. “We want open markets, free markets but we have to convince the U.S. administration,” Altmaier told German television. “We tried to do it through negotiation and we will now do it by standing together and formulating a common European answer, possibly working more closely with Mexico and Canada,” he said, adding he hoped this would make Trump rethink. Canada, the largest supplier of steel to the United States, will impose tariffs covering C$16.6 billion ($12.8 billion) on imports from the United States, including whiskey, orange juice, steel, aluminum and other products, Foreign Minister Chrystia Freeland said. Late on Thursday, Trump issued a statement about the NAFTA negotiations, saying the days of the United States being taken advantage of on trade were over. “The United State will agree to a fair deal, or there will be no deal at all,” Trump said. Mexico announced what it described as “equivalent” measures on a wide range of U.S. farm and industrial products. The measures, which target pork legs, apples, grapes and cheese as well as steel and other products, will be in place until the U.S. government eliminates its tariffs, Mexico’s Economy Ministry said. The S&P 500’s packaged foods and meats industry sub-index fell 2 per cent, with shares of meat producer Tyson Foods Inc falling 3.9 per cent, Campbell Soup Co 2.6 percent and spice maker McCormick & Co Inc 2.9 per cent. The Mexican peso dropped about 1 per cent, hitting its weakest level against the dollar in nearly 15 months, and the Canadian dollar shed about 0.6 per cent. The EU threatened tariffs on Harley Davidson motorcycles and bourbon, measures aimed at the political bases of U.S. Republican legislators. Shares of Harley-Davidson Inc fell 2.2 per cent and Brown-Forman Corp, maker of Early Times and other bourbon brands, lost 2.1 percent. EU members have given broad support to a European Commission plan to set duties on 2.8 billion euros ($3.4 billion) of U.S. exports if Washington ends tariff exemptions. EU exports potentially subject to U.S. duties are worth 6.4 billion euros ($7.5 billion). Temporary exemptions were granted to a number of nations and permanent ones to several countries including Australia, Argentina and South Korea. U.S. trading partners had demanded that the exemptions be extended or made permanent. The tariffs are aimed at allowing the U.S. steel and aluminum industries to increase their capacity utilisation rates above 80 per cent for the first time in years.
