Trade Tensions Escalate as EU Threatens to Retaliate Against U.S. Tariff on steel and aluminum

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The European Union has vowed to retaliate against the United States after new tariffs on steel and aluminum were imposed, threatening to ignite an extended global trade war.

European Commission President Ursula von der Leyen denounced the decision, saying, “Unfairly imposed tariffs on the EU will not be left unanswered — they will incur firm and proportionate retaliation.” The European Commission, the EU’s executive arm, is now weighing its response.

The alert comes after United States President Donald Trump inked an executive order slapping 25% tariffs on imported steel and aluminum. The action led to a rally in the shares of U.S. steel producers on Monday because domestic producers will gain an advantage from the trade policy.

Economic Impact of the Tariffs
Tariffs are a tax on imports that raise the cost for foreign producers and improve domestic options. Opponents, nevertheless, like von der Leyen, claim that in the end this damages business and consumers by raising costs.

Trump has been very much on the attack when it comes to trade policy early in second term, imposing tariffs already on China, Canada, and Mexico. Though tariffs on Canada and Mexico have been delayed temporarily by a month, things are escalating with the EU.

Europe is not the only economic powerhouse fighting back. China recently slapped new tariffs on certain U.S. imports, once again escalating the tensions on the trade front.

Diplomatic Talks & Inflation Fears
Von der Leyen will meet U.S. Vice President JD Vance on Tuesday to discuss the issue, according to Reuters.

The tariff war is unfolding against a backdrop of global inflation concerns, with domestic prices still below pre-pandemic levels. Economists worry that tariffs would increase costs further, stoking inflationary pressures in the U.S. as well as abroad.

Though retaliatory actions from key world actors are in the works, the risk of a protracted trade war remains a real threat to the global economy.