Donald Trump’s trade war has expanded to cover the world, with 25% tariffs on all steel and aluminium imports to the US in effect from today, affecting UK products worth hundreds of millions of pounds.
The duties were announced in mid-February as stock market investors cheered President Trump‘s ‘America first’ agenda which saw only Mexico, Canada and China come under initial pressure.
While two rounds of tariffs on China have been enacted, 25% duties on some Canadian and most Mexican cross-border trade have been withdrawn until 2 April at the earliest.
The tariffs beginning today are designed to protect US manufacturing and bolster jobs by making foreign-made products less attractive.
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They threaten to make the cost of things like cars to soft drink cans – and therefore some drinks – more expensive.
Canada is the biggest exporter of both steel and aluminium to America. However, the White House on Tuesday rowed back on a threat to double the country’s tariff to 50%.
The American tariffs are a threat to UK steel exports worth north of £350m annually – with the bulk of that coming from stainless steel.
The business secretary Jonathan Reynolds said on Wednesday morning that while he was disappointed, there would be no immediate retaliation by the UK government as negotiations continue over a wider trade deal with the US.
“I will continue to engage closely and productively with the US to press the case for UK business interests,” he said.
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The EU, however, vowed to retaliate with €26bn of counter tariffs on US goods starting from 1 April,
European Commission president Ursula von der Leyen said she remained open to “meaningful dialogue” with the US.
During Mr Trump’s first term, the bloc countered tariffs with charges on products such as US-made bourbon and jeans which were later suspended.
These duties would be re-imposed from April, the Commission said, with further products added to match the value of the US tariff hit.
Industry body UK Steel said it was a trading partner with the US, not a threat, and urged a government response.
Any fall in demand among US customers will leave producers scrambling for new markets, though some could be directed to domestic projects within the UK.
That steel could prove attractive as China, the world’s largest producer of steel, has threatened to limit its exports in response to the Trump tariffs.
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President Trump is under growing pressure to row back, particularly in his planned battle with nearest neighbours Mexico and Canada.
Markets have turned on the tariff regime, with jitters about the effects of higher import prices souring the US economy first being seen through the currency and bond markets.
The dollar has lost around five cents against both the pound and a resurgent euro alone in the past few weeks.
Stock markets have joined in, with the combined market value of the broad S&P 500’s constituent companies down by more than $4trn on the peak seen just last month.
The big fear is that the protectionism will push the world’s largest economy into recession – a scenario Mr Trump did not deny was possible during a weekend interview.
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US firms, already also grappling the complexities associated with an expanding tariff regime, are also letting it be known that they expect damage to their own businesses.
Delta Airlines lowered its first quarter growth forecast on the back of the turmoil this week while US firms are increasingly facing product boycotts.
Travel bodies have also reported a big drop in the number of Canadians crossing the US border, with road trips down by almost a quarter last month compared to February 2023 according to Statistics Canada.
Business
Small acts of defiance in Canada raise question of what country can do against Trump’s tariff trade war
In Miche cafe and bar in British Columbia’s capital, Victoria, owner Allan Sinclair is turning around specific alcohol bottles on the top shelf to hide the labels from public view.
He picks up a bottle of Jack Daniels.
“This is from Tennessee and they supported Trump so we can’t have that,” he says.
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Allan Sinclair, owner of Miche cafe and bar in British Columbia’s capital, Victoria
Bottles of American liquor were being turned around in the Canadian store
A bottle of Wayne Gretzky’s cream liquor is nearly finished.
“Once it’s gone, I’m going to get rid of it,” says Allan. “He’s shown he doesn’t respect our country anymore.”
Gretzky, once a Canadian ice hockey hero, has alienated many here with his steadfast support of the American president.
Allan also sells “Canadianos,” which he says, wryly, are stronger than Americanos.
They are quiet but considered acts of defiance in the face of a trade war started by the United States.
“It is a small protest in the form of a coffee,” he says. “What we can do is hope that they don’t follow up with all of this madness.”
Tuesday began with Donald Trump announcing a 50% tariff on aluminium and steel coming from Canada. Just hours later, that was revised back down to 25%.
There is a grinding, on-off, tit-for-tat nature to these economic punishments.
The British Columbia premier David Eby retaliated to the Trump tariffs by prohibiting the sale of American-manufactured alcohol in his province.
The Miche cafe and bar doesn’t sell Americanos
‘Buy Canadian Instead’
BC Liquor Store is just steps away from the premier’s office in Victoria.
On the shelves where Kentucky bourbon would usually be there are signs saying: “Buy Canadian Instead.”
Dozens of bottles of California and Oregon wine are wrapped tightly with cellophane.
But the threats from the Trump administration don’t end with tariffs.
The president has stated repeatedly that he’s keen to make Canada the 51st state. Even referring to Prime Minister Justin Trudeau as “governor”.
British Columbia premier David Eby speaking to Sky News
Premier Eby tells Sky News: “These are deeply unnerving statements for the president to be making, especially in the context of clearly expansionist policies related to Greenland and the Panama Canal.
“What we get continually about the president is to take him seriously, but not literally.
“I would love to have that kind of luxury… the danger, I think, is not taking him literally and seriously.”
‘I’m trying to buy anything but American‘
On the ferry which connects Vancouver Island with the mainland, tariff fatigue is setting in.
Passenger Nancy, a government worker, says she thinks Donald Trump is intent on causing mayhem. “He’s a menace, he’s just creating chaos where it doesn’t need to be.”
Her colleague Laura says the silver lining is that the tariffs have galvanised Canadians together.
Laura, a government worker, says the tariffs have brought Canadians together
“People feel hurt and angry,” she says. “We are trying to buy more Canadian products and travel anywhere other than the United States. I had a trip booked to Las Vegas and we’ve cancelled that. When I go to the grocery store, I look for the Canadian maple leaf that a lot of grocery stores have put on the shelves. I’m trying to buy anything but American.”
Richard thinks Donald Trump’s end game is to weaken the Canadian economy.
“I think Trump had an agenda from the beginning, without a doubt. I think he wanted to cause a collapse of the Canadian economy so it would make it easier for him and his colleagues to buy up whatever they wanted, if not to make us a 51st state – it had nothing to do with Fentanyl, that was just a ruse.”
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He’s referencing the Trump administration’s repeated claims that Fentanyl, a devastating opioid that has ravaged parts of both America and Canada, is flooding over the Canadian border into the US.
It’s the reason, they say, for starting this trade war.
One reason Mr Trump gave for initiating the trade war was the alleged flow of fentanyl over the border
Dr M-J Milloy, director of research at British Columbia Centre on Substance Use, says that this simply isn’t true.
“There is no one who knows anything about drug markets in North America who would agree with the statement that Canada is a substantial part of the problem in the United States. It is a fiction.”
Dr M-J Milloy, director of research at British Columbia Centre on Substance Use
“No question that Fentanyl has devastated the United States. Fentanyl is devastating Canada. And so I think in that way, it might be a potent way for Mr Trump to whip up enthusiasm and to justify this aggression,” he adds.
Whatever the reason – invented or otherwise – for this trade war, it’s making an enemy of this ally.
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The question is, what power does Canada really have in the face of its much bigger, far wealthier neighbour?
A “shattering blow” has been dealt to farmers with the sudden pausing for new applications for environmental payments, according to the National Farmers’ Union.
The NFU says it was given just 30 minutes notice by the government that applications for the Sustainable Farming Incentive (SFI) were to close on Tuesday.
The post-Brexit scheme, launched in 2022, pays farmers and land managers to take up practices that improve productivity and protect the environment and climate.
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Protesters disrupted Defra Secretary Steve Reed’s speech at the NFU conference. Pic: PA
There were more than 100 options for farmers to choose from, including the management of hedgerows, organic farming development and providing habitat for wildlife.
The government says the budget for SFI has now been reached, adding that a “record” 50,000 farm businesses and more than half of all farmed land is now managed under the schemes.
Both Conservatives and Liberal Democrat politicians have criticised the move and the lack of any prior warning.
But NFU president Tom Bradshaw said the decision showed “how little” the Department for Environment, Food And Rural Affairs (Defra) understood the industry.
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“This is another shattering blow to English farms, delivered yet again with no warning, no understanding of the industry and a complete lack of compassion or care,” Mr Bradshaw said.
“Today’s terrible news was delivered with only 30 minutes warning to us before ministers briefed the press, leaving us unable to inform our members.
“There has been no consultation, no communication; there has been a total lack of the ‘partnership and co-design’ Defra loves to talk about. It is another example of the growing disregard for agriculture within the department.”
The government has said “every penny” in all existing SFI agreements will be paid to farmers, and outstanding eligible applications that have been submitted will also be taken forward.
It said details of a new SFI scheme will be announced following the Spending Review.
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The ‘cruellest betrayal so far’
It was only last week that thousands of farmers were protesting outside Downing Street at the inheritance tax policy that’s angered so many in agriculture.
But one group representing farmers said on Tuesday the SFI decision is the “cruellest betrayal so far”.
The scheme was introduced under the Conservatives post-Brexit, to encourage sustainable farming.
It took years to develop – and was seen as world leading in a way of ensuring farming was both productive for the sector and protective of the environment.
Although a new scheme after the spending review is promised, many farmers will be left wondering whether it’ll be as comprehensive.
The National Farmers’ Union was preparing on Wednesday to release a report saying that farming confidence in England and Wales is at its lowest level ever.
It’s described Tuesday’s news as a “bleak irony”.
In a statement, minister for food security and rural affairs Daniel Zeichner said: “This government is proud to have set the biggest budget for sustainable food produce in history, to boost growth in rural communities and all across the UK, under our plan for change.
“More farmers are now in schemes and more money is being spent through them than ever before. That is true today and will remain true tomorrow.
“We have now successfully allocated the SFI24 budget as promised.”
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The government claims the last administration left the scheme uncapped – and they had to put a limit on to stop it running over budget.
‘Absolutely bonkers’
Olly Harrison, an arable farmer on Merseyside who organised the latest farming protest in London earlier this month, said the decision showed farmers were being “attacked from every single angle”.
“It’s just absolutely bonkers. The scheme worked. It was to replace what we had when we were in Europe [the EU] and a lot of farms embraced it, they were doing real good with it.”
“Why have we got people who don’t understand and don’t understand the environment in power?”
Edward Morello, the Liberal Democrat MP for West Dorset, told Sky News the decision will “alarm farmers across the UK” – and called for the government to “start listening and responding” to the agricultural community.
Tim Farron, the MP for Westmorland and Lonsdale, said the decision was made with “no warning”.
Conservative shadow farming minister Robbie Moore said the change was “absolutely scandalous”.
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