President Donald Trump said the U.S. would slap tariffs on steel and aluminum imports to protect national security, prompting threats of retaliation from Canada to China.

Trump said he would impose tariffs of 25% on imported steel and 10 percent on aluminum for “a long period of time,” and he expected to sign a formal order next week. He didn’t elaborate on the details of the planned action, including whether any products or countries would be exempted.

“You’re going to have protection for the first time in a long time,” Trump told metals industry executives at a meeting in the White House Thursday.

The planned tariffs, justified on the basis that cut-price metals imports hurt both American producers and national security, now raises the prospect of tit-for-tat curbs on American exports and higher prices for domestic users. While the practical impact may yet turn out to be limited, the political environment for global trade has just taken a turn for the worse.

Asian steel and aluminum stocks took a hammering Friday morning, adding to declines that came before the tariffs were first reported Thursday. Earlier, the S&P 500 Index slumped to session lows, U.S. stocks for companies that consume the metals like Ford Motor Co. fell, and Treasuries climbed as investors reacted to the news, while shares of U.S. steel and aluminum producers jumped.

China didn’t have an immediate official reaction Friday. The U.S. measures “overturn the international trade order,” Wen Xianjun, vice chairman of the China Nonferrous Metals Industry Association, said in a statement. “Other countries, including China, will take relevant retaliatory measures.”

Li Xinchuang, the vice chairman of China Iron and Steel Association, called the move “stupid.”

U.S. allies, seeing their industries threatened, responded with bafflement and dismay.

“Steel and aluminum imports from Japan, which is an ally, do not affect U.S. national security at all,” Japan’s Trade Minister Hiroshige Seko told reporters in Tokyo Friday. “I would like to convey that to the U.S. when I have an opportunity.”

Canada — the biggest foreign supplier of steel to the U.S. — said the measures were unacceptable while the European Union vowed to “ react firmly” with World Trade Organization-compliant countermeasures in the next few days. Australian Trade Minister Steve Ciobo called the move “disappointing” and said his country is seeking an exemption.

The punitive measures would level the unfair playing field that has persisted for years, and make it easier for American companies to expand and hire workers, Trump said.

U.S. companies from beer brewer MillerCoors to candymaker Hershey Co., which use aluminum for manufacturing and packaging, said operations would be hurt by the tariffs.

“We buy as much domestic can sheet aluminum as is available, however, there simply isn’t enough supply to satisfy the demands of American beverage makers like us,” MillerCoors said in a tweet. “American workers and American consumers will suffer as a result of this misguided tariff.”

Soybean Response

A U.S. move on tariffs risks provoking retaliation from China, the world’s biggest steel and aluminum producer. China has already launched a probe into U.S. imports of sorghum, and is studying whether to restrict shipments of U.S. soybeans — targets that could hurt Trump’s support in some farming states. While China accounts for just a fraction of U.S. imports of the metals, it’s accused of flooding the global market and dragging down prices.

What Our Economists Say…

“China’s total exports of steel and aluminum are equal to about 0.5% of GDP, most of that from steel,” said Bloomberg’s Chief Asia Economist Tom Orlik. “Relative to fears from Trump’s campaign trail rhetoric, in which he threatened an across-the-board 45% tariff on all imports from China, these measures are extremely limited.”

Trump announced the tariffs despite lobbying of his administration by foreign governments, and while Chinese President Xi Jinping’s top economic adviser is in the country on a mission to defuse tensions.

The impact of the step hinges in part on which nations will be affected, said Alex Wolf, senior emerging markets economist at Aberdeen Standard Investments in Hong Kong who previously worked at the U.S. State Department.

“It’s not much ado about nothing, but until we see the final scope of the tariffs and the response from global trading partners it’s hard to say it’s the start of a tit-for-tat trade war,” he said. — Bloomberg

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