Donald Trump is adding another brick to the rising trade barriers. The U.S. president imposed 25 percent tariffs on all steel and aluminum imports to the U.S. on Monday night, putting a question mark over extractive industry activity in his key economic partners.
Tariffs on strategic industrial materials were already in place during Trump's first term (25% on steel and 10% on aluminum), but major US trading partners (including Canada, Mexico, Brazil, Australia and the EU) enjoyed concessions at the time to ease the impact of trade restrictions. Trump 2.0, however, puts the issue on a knife-edge - the “no exceptions and no exclusions” tariffs will go into effect on March 12.
The United States currently imports about 20% of the steel it uses. The share of materials supplied by the European Union has risen under President Joe Biden from 11% to 15%, increasing Europe's exposure to the risk of an economic slowdown in the face of international trade restrictions.
In a statement, Ursula von der Leyen expressed disappointment with Trump's tariff policies, stressing that tariffs, like taxes, will hurt both business and consumers. The European Commission announced a proportionate response from the European Union, but did not specify specifics.
EURUSD is rebounding 0.25% from its low after the announcement of steel and aluminum tariffs. A precise EU retaliatory plan could push the currency pair towards the 30-period EMA (light purple). Nevertheless, volatility today will depend mainly on Fed Chairman Jerome Powell's speech. Source: xStation5
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