Trump pours kerosene on the global trade wars

President TrumpDonald John TrumpWhite House counsel called Trump 'King Kong' behind his back: report Trump stays out of Arizona's ugly and costly GOP fight Trump claims he instructed White House counsel to cooperate with Mueller MORE's decision to impose tariffs on steel and aluminum from the European Union, Canada and Mexico has pushed his administration to the brink of an all-out trade war with three of the nation’s largest trading partners. 

Commerce Secretary Wilbur RossWilbur Louis RossJudge says California lawsuit challenging census question can proceed On The Money: Trump asks SEC to consider ditching quarterly reports | Turkish court refuses to release US pastor | Russia sanctions hearing, vote on consumer chief next week On The Money: US-China trade talks to resume | Mnuchin warns of more Turkey sanctions | How Turkey's financial crisis could roil the US | Senate GOP seeks tax law fixes MORE announced Thursday morning that the U.S. would be ending the temporary exemptions that had been granted to the three countries for steel and aluminum imports. With the exemptions lifted, those imports will face tariffs of 25 percent and 10 percent, respectively. 

The move drew withering criticism from congressional Republicans, business groups and U.S. allies, who had all tried to push the president onto another path. 

But true to form, Trump defied U.S. allies in favor of the “America First” agenda he had promised as a candidate.

Trump has downplayed the danger of a trade war, calling such conflicts “easy to win.” That theory will now be put to the test, with the three countries now moving to inflict maximum pain on parts of the American economy. 

Canada, Mexico and the EU all announced a series of retaliatory measures following the Trump administration’s decision.

Canada’s Minister of Foreign Affairs Chrystia Freeland said Ottawa would impose upward of $12.8 billion in tariffs starting July 1 on U.S. steel, aluminum and a range of other American products.

U.S. steel components will be taxed at 25 percent, while other goods, including aluminum, toilet paper, whisky and orange juice, will see tariffs of 10 percent. The tariffs will remain in place until the United States drops its duties.

“This is the strongest trade action Canada has taken in the post-war era,” Freeland said.

Jean-Claude Juncker, president of the European Commission, said, “the U.S. leaves us no choice but to proceed with a [World Trade Organization] dispute settlement case and the imposition of additional duties on a number of U.S. imports."

“This is protectionism, pure and simple,” Juncker said.

EU Commissioner for Trade Cecilia Malmström said the EU will impose "rebalancing measures and take any necessary steps to protect the EU market from trade diversion caused by these U.S. restrictions."

In a statement, the EU referenced a 10-page list of possible targets for $3.3 billion in tariffs. The list includes iconic U.S. products such as Kentucky bourbon, jeans and Harley-Davidson motorcycles.

Mexico said it would impose tariffs on a wide range of American products, including steels such as hot and cold foil, lamps, pork, sausages, apples, grapes, blueberries and various cheeses.

"Mexico deeply regrets and condemns the decision of the United States to impose these tariffs on imports of steel and aluminum from Mexico from June 1, at the discretion of national security," the government said in a statement. “Mexico has indicated repeatedly that such measures under the criteria of national security are not adequate nor justified.”

Last year, nearly 50 percent of U.S. steel and aluminum imports came from the EU, Canada and Mexico.

Liam Fox, the United Kingdom’s secretary of state for international trade, noted that his country is a supplier of steel for the U.S. defense industry. He called the tariffs “patently absurd.”

“This is deeply disappointing, to try to prevent this we are working with the steel industry, and the U.S. and our European allies to find a solution to this,” Fox said during a Sky News interview.

“A trade war will be bad for consumers on both sides of the Atlantic,” he said.

The action on tariffs came a week ahead of the Group of Seven meetings in Canada, where Trump is likely to face the ire of other world leaders. The tariffs go into effect Friday. 

Ross dismissed suggestions that the U.S. is igniting a trade war with allies and downplayed the effects on the U.S. economy as “trivial.”

“As you know, this has been under discussion for quite a long time and it’s a very small percentage of the respective economy. A fraction of 1 percent,” Ross told CNBC’s “Squawk on the Street" during an interview from Paris.

But Dan Ikenson, head of trade at the Cato Institute, predicted the U.S. economy will suffer — and said it’s a lesson Trump’s supporters will have to learn the hard way.

“The boil must be lanced. The fever needs to break. History is no longer persuasive. We need fresh evidence that trade wars cause economic contraction and job loss,” Ikenson said on Twitter. “The rubes who delivered us Trump will bear the brunt. That’s a just outcome.” 

Republicans in Congress, who have tried to steer the president away from tariffs, expressed dismay at his decision.

Sen. Orrin HatchOrrin Grant HatchSentencing reform deal heats up, pitting Trump against reliable allies Dem lawmaker calls Trump racist in response to 'dog' comment PETA calls out Trump for attacking Omarosa as a 'dog' MORE (R-Utah), the chairman of the Senate Finance Committee, said the tariffs were "a tax hike on Americans and will have damaging consequences for consumers, manufacturers and workers." 

His counterpart in the House, Ways and Means Committee Chairman Kevin BradyKevin Patrick BradyTreasury releases proposed rules on major part of Trump tax law Republicans happy to let Treasury pursue 0 billion tax cut Trump weighs big tax cut for rich: report MORE of Texas, said the tariffs “are hitting the wrong target” and instead should be aimed at China, a sentiment echoed by Speaker Paul RyanPaul Davis RyanNew Dem ad uses Paterno, KKK, affair allegations to tar GOP leaders House Dem: Party's aging leaders is 'a problem' Rand Paul to ask Trump to lift sanctions on Russian leaders MORE (R-Wis.).

“I disagree with this decision,” Ryan said in a statement. “Instead of addressing the real problems in the international trade of these products, today’s action targets America’s allies when we should be working with them to address the unfair trading practices of countries like China.” 

Republican Sen. Pat ToomeyPatrick (Pat) Joseph ToomeyOvernight Defense: Pick for South Korean envoy splits with Trump on nuclear threat | McCain blasts move to suspend Korean military exercises | White House defends Trump salute of North Korean general WH backpedals on Trump's 'due process' remark on guns Top GOP candidate drops out of Ohio Senate race MORE (Pa.) said the decision was “bad news,” while Sen. Ben SasseBenjamin (Ben) Eric SassePollster: Attitudes toward Trump's farm aid are 'highly wrapped up' in feelings toward president Poll: Majority of Americans support Trump's plan to offer aid to farmers hit by tariffs Hillicon Valley: 'QAnon' conspiracy theory jumps to primetime | Senate Intel broadens look into social media manipulation | Senate rejects push for more election security funds | Reddit reveals hack MORE (Neb.) called it “dumb.” 

Beyond the possible economic effects, Trump's decision to hit U.S. allies with tariffs could portend more drastic moves on trade from the administration, such as withdrawing from the North American Free Trade Agreement (NAFTA) or imposing new tariffs on imported cars.

"This represents another signal that prospects for a near-term NAFTA deal are fading, just a few weeks after it had appeared fairly likely that a 'skinny' agreement involving the auto sector might be reached," said Goldman Sachs analyst Alec Phillips.

The stock market, once among Trump’s favorite barometers of success, reacted badly to the tariff news. The Dow Jones industrial average sank 250 points, about 1 percent.

Business groups, meanwhile, voiced increasing concern about how the tit-for-tat on tariffs would affect their industries.

Brian Kuehl, executive director of Farmers for Free Trade, said “this announcement opens the floodgates to billions in new tariffs on American agriculture.”

“These tariffs will harm U.S. farmers and take many American farm operations to the breaking point,” Kuehl said.

The Association of Equipment Manufacturers said “starting a trade war with three of our nation’s largest trading partners and strongest allies will disrupt the entire global trading system, placing American manufacturing jobs at risk.”

Trump was defiant in the face of the criticism.

“FAIR TRADE,” he tweeted.