Donald Trump’s trade war continues to escalate as nations begin imposing retaliatory measures against his global blanket tariff on steel and aluminium imports to the US.
Following the European Union’s decision to react with tariffs on €26 billion worth of goods from the US – including a 50 per cent levy on whiskey – the US president has threatened a massive 200 per cent levy on all alcohol coming from the bloc.
Meanwhile, neighbouring nation Canada has announced tariffs on nearly C$30bn of US products.
The developing situation began after Trump placed 25 per cent tariffs on steel and aluminium coming from all countries earlier this week.
This blanket measure spreads to all European nations, the UK included. It ends Trump’s apparent ambivalence on whether to include the UK in his tariff drive, reaching the decision that no nation should be spared.
The tariffs raise a flat duty on steel and aluminium entering America to 25 per cent. This could affect UK products worth hundreds of millions of pounds as products like cars, cans and tin foil are likely to become more expensive.
Trump’s decision inevitably came as a disappointment to Sir Keir Starmer, whose spokesperson said only the day before that Downing Street was talking to the US administration to “make the case for the UK to be exempt from proposed tariffs.”
Speaking at Prime Minister’s Questions in the aftermath, the prime minister said: “I’m disappointed to see global tariffs in relation to steel and aluminium. We will take a pragmatic approach.”
The UK is “negotiating an economic deal which covers and will include tariffs if we succeed,” he told MPs. “But we will keep all options on the table.”
But it would appear the prime minister’s diplomatic approach to the new US administration has fallen on deaf ears, as the UK receives no exemption from the blanket tariff expansion.
The government has not followed the European Union in imposing retaliatory trade tariffs on the US, instead focusing on attempting to secure an exemption.
European Union President Ursula von der Leyen said she “deeply regrets” the tariffs, but added that the EU remains “open to negotiations.”
She said: “They are disrupting supply chains. They bring uncertainty for the economy. Jobs are at stake, prices up, nobody needs that, on both sides, neither in the EU or the US.”
What do these tariffs mean for UK trade?
In the UK, the steel industry is already struggling as excess capacity in the global market has pushed prices down. This large-scale production is largely coming from China, which is what is partly motivating Trump to place even higher tariffs on the country’s steel at a massive 45 per cent.
Industry figures in the UK have already begun to disagree with the Labour’s reaction, calling on the government to act. Gareth Stace, the director-general of trade association UK Steel, branded the Trump administration’s move “hugely disappointing”, and urged the government to take “decisive action” to protect the industry.
“These tariffs couldn’t come at a worse time for the UK steel industry, as we battle with high energy costs and subdued demand at home, against an oversupplied and increasingly protectionist global landscape”, he said.
The US is the steel industry’s second largest export market behind the European Union.
UK Steel says that in 2024 the UK exported 180,000 tonnes of semi-finished and finished steel to the US, worth £370 million, some 7 per cent of the UK’s total steel exports by volume and 9 per cent by value.
If this trade is lost, it could have a devastating knock-on effect on an already struggling industry. Community union assistant general secretary Alasdair McDiarmid said: “These US tariffs on UK steel exports are hugely damaging and they threaten jobs.
“For the US it’s also self-defeating, as the UK is a leading supplier of specialist steel products required by their defence and aerospace sectors.”
Whether the move will have knock-on effect on UK prices will be depend how US consumers react to the tariffs in the coming months. Prices for these goods are set to see sudden rises in the US, at least in the short-term, as importers look to offset the shock rise in costs.
This could result in lower demand for steel in the country, which would in turn mean less trade for the UK’s steel industry. In this scenario, manufacturers may choose to boost their prices in all global markets to offset the lost profit, hitting the pockets of UK buyer’s in a roundabout way.
And while the UK has not been threatened directly with the 200 per cent levy on alcohol, such a measure being imposed on the EU could certainly have a knock on effect on prices in Britain.