Donald Trump escalated the global trade war on Wednesday by threatening to impose further tariffs on European Union goods, just hours after his 25% duties on all U.S. steel and aluminum imports went into effect.
In a meeting with the Irish Prime Minister Micheal Martin on Wednesday, Trump said he would escalate tariffs on the EU if it proceeds with its planned counter-tariffs. He also criticized the EU member country for its business-friendly environment that lures away U.S. pharmaceutical firms.
The president’s warning came in direct response to the EU’s countermeasures on American products starting in April. “Whatever they charge us, we’re charging them,” Trump told reporters at the White House.
On the other hand, Canada’s Finance minister, Dominic LeBlanc said, “We will not stand idly by while our iconic steel and aluminum industries are being unfairly targeted” while announcing retaliatory tariffs on $29.8B worth of U.S. goods. The Canadian central bank cut interest rates in preparation for what it expects could be significant economic disruptions.
“We will not stand idly by while our iconic steel and aluminum industries are being unfairly targeted,” Finance Minister Dominic LeBlanc says as he announces retaliatory tariffs on $29.8B worth of U.S. goods in response to President Trump’s steel and aluminum tariffs. #cdnpoli pic.twitter.com/E7WbQSFqiz
— CPAC (@CPAC_TV) March 12, 2025
According to U.S. Commerce Secretary Howard Lutnick, the White House now plans to include copper under its trade shield as well. Meanwhile, the EU’s counter-tariffs are estimated to target up to 28 billion dollars worth of US products. These include goods like dental floss, diamonds, bathrobes, and bourbon.
Although the value of goods directly affected by these measures covers only a tiny fraction of the enormous EU-U.S. commercial relationship, concerns over a more extensive trade conflict have shaken market confidence and stoked fears of a possible recession.
Such warnings have stoked recession fears, as well as lowered investor and business confidence. Some analysts warn that if the president continues to impose harsh measures on partners in North America and Europe, global markets could be in for significant turmoil.
Trump’s economic plans are causing panic among his own advisers
Trump’s unpredictable approach to economic messaging has caused panic among his own allies. According to a WSJ report, the senior officials at the White House received a large number of calls from Republican lawmakers and business executives.
Executives from major tech companies met with Trump and senior advisers at the White House on Monday to discuss the impact of tariffs on their industries. One Attendee mentioned that the CEOs particularly highlighted the tech sector. Still, Trump stayed adamant about increased investment in the US when speaking with reporters after the meeting ended.
Last week, Treasury Secretary Scott Bessent mentioned that the economy requires a detox. It increased the worries of the Republicans. Since Trump also refused to rule out a recession, Wall Street tumbled down last Monday and gains since November’s election day were wiped out.
Despite warnings from advisers about potential harm to growth, Trump remains largely committed to his aggressive tariff policy, occasionally announcing sudden exemptions or policy reversals that add to uncertainty.
ECB President Christine Lagarde wars of growing uncertainty
European Central Bank (ECB) President Christine Lagarde warned on Thursday of growing uncertainty linked to recent U.S. policy decisions, signaling fresh challenges for the eurozone economy.
In a speech last week, Lagarde described current conditions as “exceptionally high” in uncertainty, directly attributing this instability—without naming him—to U.S. President Trump.
She pointed specifically to recent policy shifts, notably the Trump administration’s decision to impose 25% tariffs on steel and aluminum imports, announced last week, prompting immediate retaliation by the European Union.
Lagarde said these tariffs could weaken EU exports to the U.S., potentially driving down inflation. At the same time, she noted that Europe’s increased defense spending—triggered by uncertainty over the reliability of the U.S. as a military ally—might have the opposite effect by pushing prices higher.
The ECB, already grappling with economic uncertainty, recently cut its key interest rate from 4.0% to 2.5%—the sixth rate reduction since June 2024. In such an environment, central banks will not be able to provide “forward guidance,” according to Lagarde.
She further added, “When the size and distribution of shocks becomes highly uncertain, we cannot provide certainty by committing to a particular rate path.
Nevertheless, Lagarde said that central banks should not add to the economic certainty by leaving businesses and households in complete darkness about rate changes. She said, “The public must understand the distribution of possible outcomes ahead and how the central bank will react once it is sufficiently confident about which scenario it is facing.”
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