President Trump's 25 percent tariff on imported steel and 10 percent levy on aluminum went into force for Mexico, Canada, and the European Union at midnight on Friday, and all three key U.S. allies quickly vowed to retaliate. The specter of a trade war sent U.S. markets reeling, with the Dow closing down 252 points, or 1 percent, on Thursday. The EU has promised to target imports of U.S. products like Kentucky bourbon, motorcycles, and blue jeans, while Mexico said it will slap tariffs on U.S. pork, grapes, cheeses, apples, and flat steel. Canada, which provides most of America's imported steel and aluminum, said it will hit the U.S. with tariffs on $12.8 billion worth of steel, toilet paper, and other goods.
Early Friday, Germany's economy minister said the EU might coordinate its response with Canada and Mexico. French President Emmanuel Macron called Trump's tariffs "illegal" and warned that as the world learned in the 1930s, "economic nationalism leads to war." Canadian Prime Minister Justin Trudeau said "these tariffs are totally unacceptable" and criticized Trump's national security justification for imposing them. "That Canada could be considered a national security threat to the United States is inconceivable," he said.
"There will be a lot of focus in the weeks ahead on the direct, first-round effects of the steel and aluminum tariffs" in the U.S., including higher prices for certain products and some businesses that "shutter entirely," writes Neil Irwin at The New York Times. But the "longer-term danger for the American economy" is that Trump's "trade policy is displaying an erratic, improvised, us-against-the-world quality." In a market economy, "businesses can thrive despite bad policies," as long as they are stable, he adds. "That stability is part of what differentiates rich countries from poor ones," and the big cost of Trump's policies is "the risk that the United States is not as stable and reliable a place to do business as you once thought."