FxGlobalHub: Scenarios and News Analysis: US - EU trade tensions escalate: Steel and Aluminum tariff war erupts

EU's firm stance

European Commission President Ursula von der Leyen emphasized that this decision is a necessary response to protect the EU economy from what she described as unfair US trade practices. While the EU does not wish to further destabilize the global economy, it will not remain passive.

EU steel export to the US

Market reactions and global impact

The financial markets reacted sharply to these developments. European stock futures edged higher due to optimism surrounding peace talks in Ukraine, while the euro slipped 0.3%, ending its three-day rally.

Compared to the 2018 trade war under the Trump administration, the EU's countermeasures this time are more assertive. The new tariffs target not only metals but also textiles, agricultural products, and household appliances. Iconic American goods like bourbon whiskey, Harley-Davidson motorcycles, and boats will face higher duties — mirroring the EU's previous retaliatory moves.

Pressure on European steel and aluminum

European steel and aluminum producers are bracing for oversupply as products unable to enter the US flood the domestic market. The European Steel Association (Eurofer) warned that cheap imports from Asia, North Africa, and the Middle East will further strain the EU’s steel industry.

Long-term trade conflict outlook

The US-EU trade dispute over metal tariffs dates back to 2018, when the Trump administration imposed tariffs citing national security concerns. Although a temporary tariff rate quota (TRQ) agreement was reached in 2021, Washington's recent actions have pushed the EU to restore suspended tariffs and impose new duties on 8 billion USD worth of American goods.

US exports hit by EU tariffs in Trump's first trade war

Global supply chain disruptions

This trade conflict extends beyond the US and EU, threatening global supply chains. If tensions escalate, production costs for key industries such as automotive, construction, and consumer electronics could surge. Major US trading partners, especially China, are rethinking their strategies to reduce reliance on the American market — potentially shifting global trade dynamics.

As US-EU trade tensions grow, global businesses and investors must closely monitor policy shifts on both sides. Proactive strategies will be crucial in mitigating risks amid this rapidly changing international trade landscape.