Many analysts warn that U.S. tariffs on steel and aluminum, along with ongoing tariff threats, are creating uncertainty and disruption in the U.S. economy, and such unpredictability is making it harder for investors, businesses and consumers to plan ahead, keeping recession fears alive.

BEIJING, March 13 (Xinhua) -- The U.S. administration's 25 percent tariffs on steel and aluminum imports took effect on Wednesday, triggering backlash from its trading partners and allies.

Analysts worldwide warn that, despite its attempt to bolster U.S. manufacturing, the latest protectionist move will backfire, dealing a significant blow to the U.S. economy. It is expected to hurt U.S. downstream industries and consumers, drive up costs, and weaken the global competitiveness of U.S. products, all while straining relations with key economic partners.

RETALIATION

The European Commission announced on Wednesday that it will impose retaliatory tariffs on 26 billion euros (about 28.3 billion U.S. dollars) worth of U.S. goods starting next month in response to the 25 percent tariffs on steel and aluminum imports.

Denouncing the U.S. move as "unjustified," European Commission President Ursula von der Leyen said in a statement that the countermeasures introduced are firm yet proportionate.

"As the U.S. is applying tariffs worth 28 billion dollars, we are responding with countermeasures worth 26 billion euros. This matches the economic scope of the U.S. tariffs," she said.

On Wednesday, Japan's Chief Cabinet Secretary Yoshimasa Hayashi expressed regret over the U.S. decision to impose additional tariffs without exempting Japan, noting that such broad trade restrictions could significantly impact Japan-U.S. economic relations, the global economy and the multilateral trade system.

Also on Wednesday, Australian Prime Minister Anthony Albanese described the tariffs as "entirely unjustified."

"This is against the spirit of our two nations' enduring friendship and fundamentally at odds with the benefits that our economic partnership has delivered over more than 70 years," Albanese said at a press conference.

Describing the Trump administration's tariff decision as "unprovoked and unjustified," Australian Foreign Minister Penny Wong said that denying an exemption is "not the way to treat a friend and partner."

Meanwhile, Canada announced Wednesday reciprocal tariffs on U.S. steel and aluminum imports worth 29.8 billion Canadian dollars (20.7 billion U.S. dollars).

These measures come on top of the initial 30 billion Canadian dollars worth of U.S. imports that Canada imposed tariffs on earlier this month in response to Trump's U.S. International Emergency Economic Powers Act tariffs put in place on March 4.

PAIN AHEAD

"Trump's metals tariffs will cost American industry dearly," according to a piece in The Economist on Tuesday. Noting that the U.S. industry is heavily dependent on imports of metals, the article said that net imports of steel and aluminum account for 15 and 80 percent of U.S. demand, respectively, with Canada being the single largest source of aluminum imports.

Tariffs and rising manufacturing costs are creating significant challenges for various U.S. downstream industries reliant on metal imports. A new report by Boston Consulting Group showed that the new tariffs would add about 22 billion dollars to the cost of imported steel and aluminum products, with an additional burden of up to 29 billion dollars for derivative goods.

Gary Clyde Hufbauer, a nonresident senior fellow at the Peterson Institute for International Economics, told Xinhua that the tariffs would lead to U.S. steel and aluminum prices being "substantially higher than world prices for the foreseeable future."

"That spells harm for a large number of downstream industries that use steel and aluminum. Those downstream industries employ about 10 times as many workers as the steel and aluminum industries," Hufbauer said.

While U.S. businesses importing goods are directly responsible for paying tariffs, the burden ultimately falls on U.S. consumers, who face higher prices or shrinking product sizes as companies pass on the added costs.

According to estimates by British bank Barclays, steel accounts for more than a tenth of the cost of goods in equipment such as excavators. Crown and Ball, two makers of aluminum cans for fizzy drinks and beer, will see the cost of a 12-ounce can go up by about a tenth. Coca-Cola has said it may have to shift more of its packaging from aluminum to plastic bottles.

In a letter to U.S. President Donald Trump last month, the Can Manufacturers Institute, a group that represents manufacturers and suppliers of metal cans, pointed out that the 2018 tariffs ended up having contrary effects to what they were intended to do.

The group said nine American tin mill steel producers shut down after Trump imposed tariffs on steel in 2018. Only three production lines remain open in the United States today.

In a recent analysis, property data provider CoreLogic said that Trump's tariffs could raise home construction costs in the United States by 4 to 6 percent over the next 12 months and add around 17,000 to 22,000 dollars to the sticker prices for new homes.

RECESSION FEARS LOOM

Many analysts warn that U.S. tariffs on steel and aluminum, along with ongoing tariff threats, are creating uncertainty and disruption in the U.S. economy, and such unpredictability is making it harder for investors, businesses and consumers to plan ahead, keeping recession fears alive.

In a recent report titled "Trump's tariff chaos threatens an economy already flashing yellow lights," CNN said the health of the U.S. economy is looking less and less stable by the day.

Those tariffs -- if they get imposed -- could increase costs for Americans at a time when inflation remains stubbornly above the Federal Reserve's target. That, in turn, could prevent the Fed from lowering borrowing costs, it said.

U.S. tariff policies have left many American businesses, in particular, feeling uncertain.

"It creates an enormous amount of uncertainty for multinational companies that sell products worldwide, that import from the rest of the world, that run these complex supply chains through multiple countries," Eswar Prasad, an economist at Cornell University, told U.S. media.

Concerns over tariff hikes and other policies driving up inflation and straining household finances are also dampening consumer sentiment.

According to data from the Conference Board, the Consumer Confidence Index fell to 98.3 in February, marking its third consecutive monthly decline and the sharpest drop since August 2021, as inflation expectations for the year ahead increased.

In its Survey of Consumer Expectations published on Monday, the Federal Reserve Bank of New York reported that median inflation expectations rose by 0.1 percentage point to 3.1 percent for the one-year horizon; the share of households expecting a worse financial situation in one year rose to 27.4 percent, the highest level since November 2023.

According to data from the U.S. Bureau of Economic Analysis, real gross domestic product growth in the United States slowed significantly in the fourth quarter of 2024, falling from 3.1 percent in the previous quarter to 2.3 percent.