Global Trade War Escalates as Tariffs Expanded, Inciting Retaliation by U.S. Trading Partners

In a further sign of the Trump Administration’s reliance on tariffs as a tool to further its domestic and foreign policy objectives, new tariffs of 25% on steel and aluminum imports into the U.S. went into effect on March 12. These tariffs had been previously announced (including coverage of steel and aluminum derivative products, not just raw materials) but negotiations for exemptions failed. The new tariffs apply to all imports from all countries.

These new steel and aluminum tariffs were imposed under Section 232 of the Trade Expansion Act of 1962 and were, essentially, an extension of the previous “national security” tariffs that had been imposed during the first Trump Administration in 2018. Under this statute, the President can impose tariffs following an investigation by one of more federal agencies on whether imports of the subject merchandise are threatening U.S. national security interests. 

A Commerce Department investigation in 2017-18 found that such harm was present with respect to steel and aluminum raw materials and recommended imposing tariffs of 25% on imports of steel products and 10% on aluminum products. Such duties were then imposed but many large steel- and aluminum-producing countries (including Australia, Brazil, Japan Mexico, and South Korea) obtained exemptions. These exemptions are no longer available for the new tariffs but none of these countries announced any plans to retaliate against the U.S. for the new steel and aluminum tariffs.

Canada responded to the latest round of tariffs on March 13 by imposing 25% tariffs on a list of U.S. goods totaling C$29.8 billion, including C$12.6 billion worth of steel products, C$3 billion worth of aluminum products, and other US goods worth C$14.2 billion. Merchandise categories include tools, computers and servers, display monitors, sports equipment, and cast-iron products. The new tariffs will apply to goods of U.S. origin as determined by the United States Mexico Canada Agreement (USMCA) marking rules (formerly NAFTA marking rules found at 19 C.F.R. § 102 et seq.). The new tariffs announced on March 13 are in addition to those previously announced by Canada on March 4 covering C$30B worth of other U.S.-originating goods (with no overlap between the two lists).

Finally, Canada published a proposed list of C$125B in additional duties on other U.S.-originating products that is open for public comment until April 2. This list includes all items on the March 13 list, meaning there could be multiple tariff measures in place on a specific item as of April 2.

On March 13, the EU also responded by announcing a two-part retaliation plan for the U.S. tariffs. The first part restores the EU’s “rebalancing” tariff packages (from 2018 and 2020) that will go into effect April 1, 2025. Tariffs as high as 50% will be applied on products ranging from boats to bourbon to motorbikes. 

The second part of the EU response will eventually impose additional countermeasures on approximately €18 billion worth of U.S. exports targeting agricultural and industrial products produced in the Midwest – represented primarily by Republicans in the U.S. Congress. The first step in this process is the launch of a two-week consultation with EU stakeholders. As stated by the EU, “[t]hese consultations will ensure that the right products are chosen for inclusion in the new countermeasures, ensuring an effective and proportionate response that keeps disruption to EU businesses and consumers to a minimum.”

Finally, mainly in response to the EU retaliatory tariffs on U.S. bourbon, on March 13, President Trump announced that he would impose tariffs of 200% on all imports from the EU of wine, champagne, and all alcoholic beverages if the EU did not immediately remove the 50% tariffs on U.S. whiskey. According to data from Eurostat, about 20% of all exports of EU wine are destined for the U.S. market and the U.S. is the top market for exports of Champagne from that region of France.

BDO Insight

As President Trump continues to inject uncertainty into the global trade landscape, the focus has now broadened to include imports from the EU, as well as Canada and Mexico, the two largest trading partners of the U.S. Whether the threat of U.S. retaliatory tariffs on imports of wine and spirits from the EU will play out over the coming days and weeks, but in his first term, President Trump placed additional tariffs on imports of EU-originating liquor and other alcohol. Reports indicate that recovery from that round of tariffs was long and challenging for the industry.

The overriding question still facing U.S. companies (and nonresident companies, which include many Canadian entities that import into the U.S.) is whether the cost of any new tariffs that might ultimately be paid by the U.S. importer of record can be passed on to U.S. consumers in whole or in part. Canada, Mexico, and China account for more than 40% of all U.S. imports and include motor vehicles, pharmaceuticals, shoes, electronics, lumber, steel and aluminum, and a host of other products ultimately purchased by American retail consumers. In 2024, the U.S. was also the largest importer of EU goods (accounting for 20.6% of all EU exports) and the second largest exporter of goods to the EU (claiming 13.7% of all EU imports).

Lurking in the background is the April 2 deadline on which new “reciprocal” tariffs are expected to be announced on all imports from many of the U.S.’ major trading partners, including the EU (for prior coverage, see the alert dated February 17, 2025). President Trump recently noted that not only will the U.S. factor in the foreign duty rate on imports of U.S. goods, but VAT will also be added into the mix to determine an appropriate new “reciprocal” tariff rate via which the current U.S. duty rate will be increased the match the foreign duty and VAT rate for goods imported from each of the targeted countries.

President Trump has also noted that sector-specific tariffs will be imposed in the coming weeks on auto imports, semiconductors, pharmaceuticals, and certain other materials. 

In sum, many view these potential new tariffs as the escalation of a new global trade war in which all major trading nations will ultimately become enmeshed. Multinational companies trading in goods should consider mitigation strategies to lessen or eliminate the impact of these significant new tariffs for merchandise imported into the U.S.

How BDO Can Help

The BDO Customs and International Trade team is closely monitoring the rapidly evolving trade landscape relating to the newly announced U.S. tariffs and the expected responses from the targeted countries.

For further assistance and detailed analysis tailored to your business needs, please contact our team of international trade experts at BDO. We are here to help you assess key vulnerabilities, ensure compliance with new measures, and identify opportunities for tariff relief and supply chain diversification moving forward.


Please visit BDO’s International Tax Services page for more information on how BDO can help.