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WASHINGTON/BRUSSELS (Reuters) – Canada and Mexico retaliated with levies on billions of dollars of U.S. goods from orange juice to pork and the European Union was set to tax bourbon whiskey and Harley motorcycles after Washington risked a global trade war by imposing steel and aluminum tariffs.

FILE PHOTO: Stored rolls of steel are seen outside the ArcelorMittal Dofasco plant, an integrated steel producer, in Hamilton, Ontario, Canada, March 7, 2018. REUTERS/Peter Power/File Photo

EU Trade Commissioner Cecilia Malmstrom announced a 2 pm (1200 GMT) Friday news conference to deliver the response of the world’s largest trading bloc to the U.S. tariffs. Germany’s Economy Minister said the EU might look to coordinate its response with those of Canada and Mexico.

The U.S. tariffs on its closest allies, first touted by President Donald Trump in March, drew condemnation from Republican lawmakers and the country’s main business lobbying group and sent a chill through financial markets.

The Dow Jones Industrial Average .DJI lost 1 percent and the S&P 500 .SPX shed 0.69 percent. Shares of industrial heavyweights Boeing (BA.N) and Caterpillar (CAT.N) both fell, with Boeing down 1.7 percent and Caterpillar down 2.3 percent.

Trade war fears drove Chinese shares lower, with the Shanghai Composite Index ending down 0.7 percent. European shares were lifted by a long-awaited deal to form a government in Italy, but still sharply down for the week.

Tariffs of 25 percent on steel imports and 10 percent on aluminum were due to be imposed on the EU, Canada and Mexico from midnight (0400 GMT on Friday), U.S. Commerce Secretary Wilbur Ross told reporters.

“We look forward to continued negotiations, both with Canada and Mexico on the one hand, and with the European Commission on the other hand, because there are other issues that we also need to get resolved,” he said.

Canada and Mexico, embroiled in talks with the United States to modernize the North American Free Trade Agreement (NAFTA), responded swiftly. Canada, the largest supplier of steel to the United States, will impose tariffs covering C$16.6 billion ($12.8 billion) on imports from the United States, including whiskey, orange juice, steel, aluminum and other products, Foreign Minister Chrystia Freeland said.

“The American administration has made a decision today that we deplore, and obviously is going to lead to retaliatory measures, as it must,” Prime Minister Justin Trudeau said.

Mexico announced what it described as “equivalent” measures on a wide range of U.S. farm and industrial products, including pork legs, apples, grapes and cheese as well as steel and other goods. They will remain in place until the U.S. government eliminates its tariffs, Mexico’s Economy Ministry said.

The S&P 500’s packaged foods and meats industry sub-index .SPLRCFOOD fell 2 percent, with shares of meat producer Tyson Foods Inc (TSN.N) falling 3.9 percent.

The EU has already threatened tariffs on Harley Davidson motorcycles and bourbon, measures that would hit the political bases of U.S. Republican legislators. Shares of Harley-Davidson Inc (HOG.N) fell 2.2 percent and Brown-Forman Corp (BFb.N), maker of Early Times and other bourbon brands, lost 2.1 percent.

“We want open markets, free markets but we have to convince the U.S. administration,” Economy Minister Peter Altmaier said. “We tried to do it through negotiation and we will now do it by standing together and formulating a common European answer, possibly working more closely with Mexico and Canada.”

EU members have given broad support to a European Commission plan to set duties on 2.8 billion euros ($3.4 billion) of U.S. exports if Washington ends tariff exemptions.

The EU tariffs would come into effect on June 20, provided the 28 member states approve them. EU exports subject to U.S. duties are worth 6.4 billion euros ($7.5 billion).

TRADE CONFLICT

French President Emmanuel Macron telephoned Trump to tell him he believed the tariffs were both a mistake and illegal, his office said.

U.S. Chamber of Commerce President Tom Donohue warned in a letter to the body’s board that current trade policies could threaten economic progress and cause the loss of more than 2 million jobs, mostly in states that voted for Trump.

The tariffs are part of Trump’s effort to protect U.S. industry and workers from what he described as unfair international competition.

Temporary exemptions were granted to a number of nations and permanent ones to several countries including Australia, Argentina and South Korea. But the administration announced it would not extend the exemptions for the EU, Canada and Mexico.

Shares of U.S. Steel Corp (X.N) rose 1.7 percent, but AK Steel (AKS.N) fell 1.3 percent and Steel Dynamics Inc (STLD.O) shed 0.9 percent. Shares of Century aluminum Co (CENX.O) jumped 3.3 percent but Alcoa Corp (AA.N) shed 0.9 percent.

EYES ON CHINA

The U.S. administration also launched a national security investigation last week into car and truck imports, using the same 1962 law it has applied to curb incoming steel and aluminum.

“The Trump administration seems to regard overt threats, including tariffs and repudiation of previous agreements, as a key element for gaining leverage in trade negotiations,” said Eswar Prasad, a former head of the International Monetary Fund’s China division and now a professor at Cornell University.

Prasad warned that the United States was doing so at the cost of alienating key allies and undercutting broad international pressure on China.

Ross himself heads to Beijing on Friday where he will attempt to get firm deals to export more U.S. goods in a bid to cut America’s $375 billion trade deficit with China.

The Trump administration has demanded that Beijing make concessions and threatened to punish it for allegedly stealing U.S. technology by imposing tariffs on $50 billion of imports.

Reporting by Eric Walsh, David Shepardson and David Chance in Washington, Ingrid Melander and Michel Rose in Paris, Madeline Chambers in Berlin, Philip Blenkinsop in Brussels and Allison Martell in Toronto; Editing by Peter Graff, Susan Thomas and John Stonestreet

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