As the clouds of US economic protectionism darken ominously over Europe, one ray of hope has been steadily shining across the Atlantic: EU-Canada relations appear to be close to an all-time high. But can they weather the imminent storm?

On Wednesday, US President Donald Trump slapped blanket 25% tariffs on all US steel and aluminium imports, ostensibly to protect America’s “national security”.

The move drew immediate condemnation and retaliatory duties from both Ottawa and Brussels; other US allies, including Mexico and the UK, held their fire.

On the same day, the European Commission said it was “honoured” by the results of a recent poll showing that nearly half of all Canadians support joining the EU.

The poll, conducted at the end of February, also found that twice as many Canadians had a positive view of Europe compared to the US (68% vs 34%): a gap that almost certainly widened after Wednesday’s events and for which Trump, who has also repeatedly threatened to annex his northern neighbour, is largely responsible.

Underscoring the flourishing EU-Canada relationship, Mark Carney, a staunch Europhile and (until recently) an EU citizen, was sworn in as Canada’s prime minister only minutes ago.

The warming ties come amid deepening trade integration between Europe and Canada in recent years. A 2017 free-trade deal led to a 65% increase in bilateral trade, reaching €120.8 billion in 2023, according to the European Commission. Trump’s tariffs have also encouraged both sides to strengthen their relationship.

Alas, there is a fly in the poutine: Canada is by far the largest supplier of metals to the US, accounting for roughly 20% of all American steel imports and half of all aluminium imports.

Trump’s tariffs could therefore result in billions of dollars worth of Canadian metals being redirected and potentially dumped on Europe – exacerbating the crisis facing European industry already struggling with high energy prices and fierce Chinese competition.

EU officials say the Commission, which oversees the bloc’s trade policy, is developing plans specifically to address this “indirect” impact of US protectionism.

“We have to deal with the fact that if the US closes its market completely to steel, or at least it closes it with 25% tariffs to steel, some of that excess capacity… will try to go elsewhere,” said one senior official.

The official added that Brussels had introduced similar “safeguard measures” in response to similar (albeit lower and less extensive) tariffs during Trump’s first term, to ensure that the “wave that hit the US wall [did] not come back to hit us”.

“In the same way, we will be monitoring very closely today – whether it’s Chinese or Canadian steel that cannot enter the US market – that that steel does not end up on our markets through dumping or through any other unfair practices,” the official added.

It is, of course, entirely conceivable that Ottawa will take a sympathetic view of the EU’s imposition of such protective measures.

But it is also possible that these actions – which could include EU tariffs specifically targeting Canadian metals – might spark a parallel transatlantic trade war alongside the (seemingly inevitable) one between the EU and the US.

Indeed, there are several reasons why such pessimism may be warranted.

First, avoiding a trade spat obviously requires close political dialogue and policy coordination. But, as EU officials admit, there has been zero coordination between Brussels and Ottawa – or indeed any of the EU’s traditional allies – in responding to Trump’s tariffs.

“The European Commission is reacting… for the European Union on its own, with no degree of coordination,” the official said, adding that Brussels nevertheless remains “in touch” with allies such as Canada.

These words are as troubling as they are puzzling.

Not only were Trump’s tariffs telegraphed several months ago, but as another senior EU official noted, Brussels is currently looking to replace many products traditionally purchased from the US with “alternative suppliers” such as Canada.

The official said the EU will, for instance, seek to replace timber currently sourced from Alabama, Virginia, and Georgia with wood from Canada, the UK and Norway.

“We think there’s a good possibility for substitution in that area,” the official said.

This, however, raises an obvious question: If the EU were to impose tariffs on Canadian steel, wouldn’t Ottawa likely retaliate by, say, restricting timber exports to the EU?

Moreover, isn’t the avoidance of such tit-for-tat measures precisely why the EU should coordinate its trade policy with its allies?

The concern naturally points to another. After all, the Trump administration is full of hardline negotiators – including Trump himself – who are skilled in the dark arts of pitting allies and friends against one another.

In an especially blatant example of such divide-and-rule tactics, US Commerce Secretary Howard Lutnick this week drew a distinction between the announcements of immediate retaliation by Canada and the EU and the wait-and-see approach by the UK and Mexico.

“Europe and Canada do not respect Donald Trump and do not respect America’s ability to build its steel and aluminium industry, which is vital for national security,” Lutnick told Bloomberg TV yesterday. “Whereas you watch Mexico and you watch the UK be pragmatic and thoughtful – and the way we’re going to deal with them is going to be better.”

It is also easy to see how Washington could try to drive a wedge between Canada and the EU – and how both blocs might eventually succumb to US political and economic pressure.

For one thing, US relations with both Canada and the EU are markedly asymmetrical. The US, for instance, accounts for more than two-thirds of Canada’s total imports and exports, while Canada makes up less than one-fifth of total US trade.

Moreover, although the US accounts for a much smaller share of the EU’s total trade than Canada, it is still (by far) the bloc’s top trading partner. The EU’s total trade with Canada is also well below a tenth of its trade with the US.

In addition, despite Trump’s warming relations with Russia, the US remains the ultimate security guarantor for both Canada and the EU. An explicit threat by Washington to withdraw from NATO, for example, could force Europe to rescind its retaliatory duties on US goods – a move the Commission could seek to mitigate by strengthening defensive trade measures against allies like Canada.

Much like relations between real people, ties between countries can deteriorate extraordinarily quickly. Worryingly, and as Lutnick suggested in yesterday’s interview, global trade tensions are expected to surge significantly on April 2, when Trump’s “reciprocal tariffs”, which aim to match other countries’ levies on US goods, take effect.

Will Europe be ready? Perhaps. But it’s aboot time it got its act together.

Economic News Roundup

Donald Trump’s tariffs on steel and aluminium are “crazy” and “not at all economically useful and rational,” says top EU lawmaker. Bernd Lange, head of the Parliament’s Trade Committee, told Euractiv that Washington’s claim that the levies protect US “national security” doesn’t hold up, since they target everyday items like car bumpers and fitness devices. “It’s not at all economically useful and rational,” Lange said. “This argumentation based on… national security is crazy. A bumper for cars is not a threat to national security.” Read more.

Eurozone countries are still committed to cutting net government expenditure despite recent pledges to ramp up defence investments, say senior EU officials. Eurogroup President Paschal Donohoe said on Monday that the single currency area’s “overall fiscal stance” in 2025 is still expected to be “slightly contractionary,” as previously agreed by eurozone ministers in December. However, he acknowledged that “we are in a very, very different world” compared to the one before Donald Trump’s return to the White House in January. Read more.

The United States is unwilling to reach a deal with the European Union over threatened tariffs on EU goods, the bloc’s trade chief has said. Maroš Šefčovič said on Monday that Washington’s stubbornness comes despite repeated efforts by Brussels to engage in a “constructive dialogue” with the US over threatened tariffs on steel, aluminium, cars and other EU exports. “In the end, as it’s said, one hand cannot clap,” Šefčovič said, adding: “The US administration does not seem to be engaging [on] how to make a deal.” Read more.

Commission shares new state aid framework. State aid rules to accompany the Clean Industrial Deal that would unleash a veritable subsidy bonanza by being in place until 2030 have been shared with EU countries. Its predecessor, the TCTF, saw €47 billion greenlit by Brussels in just two years. Read more.

France didn’t like the EU executive’s proposal. “Prioritising natural gas over nuclear energy to decarbonise industry is complete nonsense. These rules contradict European ambitions,” said French MEP Christophe Grudler. Read more.

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