FILE PHOTO: A steel coil is moved at a steel mill in Hamilton, Ontario, Canada, March 12, 2025. REUTERS/Carlos Osorio/File Photo
FILE PHOTO: Casted steel bars emerge from a casting machine inside a steel bar manufacturing factory at Viramgam, in the western Indian state Gujarat, India, April 7, 2025. REUTERS/Amit Dave/File Photo

By David Ljunggren, Andrea Shalal and Julia Payne

OTTAWA/WASHINGTON (Reuters) -Canada prepared possible reprisals while the European Union reported progress in trade talks on Wednesday as new U.S. metals tariffs triggered more disruption in the global economy and added urgency to negotiations with Washington.

President Donald Trump's doubling of tariffs on steel and aluminum imports kicked in on Wednesday, the same day his administration sought "best offers" from trading partners to avoid other punishing import levies from taking effect in July.

The move will hit the closest U.S. trading partners - Canada and Mexico - especially hard. Canada is the top exporter of both steel and aluminum to the United States.

Prime Minister Mark Carney said Canada is prepared to strike back against the United States if talks with Washington to remove Trump's tariffs did not succeed.

"We are in intensive negotiations with the Americans, and, in parallel, preparing reprisals if those negotiations do not succeed," Carney told the House of Commons.

Canada's labour union Unifor called for retaliatory tariffs, while Ontario Premier Doug Ford urged Carney not to "sit back and let President Trump steamroll us."

Trump has made charging U.S. importers tariffs on goods from foreign countries the central policy of his trade wars, which have severely disrupted global trade flows and roiled financial markets.

The Republican president has long been angered by the massive federal trade deficit, saying it was emblematic of how trading partners "take advantage" of the U.S. He sees tariffs as a tool to bring more manufacturing - and the jobs that go with that - back to the United States.

However, the non-partisan Congressional Budget Office said on Wednesday that U.S. economic output will fall as a result of Trump's new tariffs on foreign goods that were in place as of May 13.

The U.S. tariff hike on the two metals to 50% from the 25% rate introduced in March took effect at 12:01 a.m. (0401 GMT) Wednesday. It applies to all trading partners except Britain, the only country so far to strike a preliminary trade agreement with the U.S. during a 90-day pause on a wider array of Trump tariffs that ends on July 8.

The 27-nation EU's trade negotiator, Maros Sefcovic, and U.S. Trade Representative Jamieson Greer said their meeting in Paris was constructive.

"We both concluded that we are advancing in the right direction, at pace," Sefcovic told reporters. Technical talks were ongoing in Washington, he said, and high-level contacts will follow.

"What makes me optimistic is I see the progress ... the discussions are now very concrete," Sefcovic said.

Greer said the talks were advancing quickly and demonstrated "a willingness by the EU to work with us to find a concrete way forward to achieve reciprocal trade."

Sefcovic said he deeply regretted the doubling of the steel tariffs, stressing that the EU has the same challenge - overcapacity - as the United States on steel, and that they should work together on that.

About a quarter of all steel used in the U.S. is imported.

GLOBAL DISRUPTION, LOCAL PAIN

In another sign of disruptions to global trade, concerns about the damage from China's restrictions on critical mineral exports deepened, with some European auto parts plants suspending output and German carmaker BMW warning that its supplier network was affected by shortages of rare earths.

Separately, Trump said early on Wednesday that Chinese President Xi Jinping is tough and "extremely hard to make a deal with," exposing frictions after the White House raised expectations for a long-awaited phone call between the two leaders this week over trade issues including critical minerals.

The expected hike in the levies jolted the market for both steel and aluminum this week, especially the latter.

Global forex, bond and stock markets took the latest tariffs in their stride, with many investors betting that the current levies may not last and that the president will back off from such extreme actions.

Uncertainty around Trump's trade policy has created havoc around the world.

The new tariffs will affect "everything from autos to aircraft to aluminum beer containers to cans for processed goods to machinery and equipment," said Georgetown University professor Marc Busch, a trade policy expert.

The American Automotive Policy Council said the tariffs will increase the cost of assembling a car in the United States and put the U.S. industry and workers at a disadvantage in the global marketplace.

Bernard Yaros, lead U.S. economist at Oxford Economics, estimated the new metals tariffs will cut business spending on equipment and structures by as much as 0.4% to 0.5%, "more than twice as large as the expected hit to consumer spending."

The Aluminum Association urged the Trump administration to reserve high tariffs for bad actors including China and include carve outs for partners like Canada.

'BEST OFFER' DUE DATE

Wednesday is also when the White House expects trading partners to propose deals that might help them avoid Trump's hefty "reciprocal" tariffs on imports across the board from taking effect in five weeks.

U.S. officials have been in talks with several countries since Trump announced a pause on those tariffs on April 9, but so far only the UK deal has materialized and even that pact is essentially a preliminary framework for more talks.

Reuters reported on Monday that Washington was asking countries to list their best proposals in such key areas as suggested tariffs and quotas for U.S. products and plans to remedy any non-tariff barriers.

In turn, the letter promises answers "within days" with an indication of what tariff rates countries can expect after the 90-day pause ends.

(Additional reporting by Dominique Vidalon, Ingrid Melander, Makini Brice, Leigh Thomas in Paris, Jo Mason in London, Andrea Shalal and Richard Cowan in Washington; Ismail Shakil in Ottawa; Nathan Gomes and Mrinalika Roy in Bengaluru; Kiyoshi Takenaka and John Geddie in Tokyo; Writing by Ingrid Melander and Doina Chiacu; Editing by Tomasz Janowski, Hugh Lawson, Nick Zieminski and Cynthia Osterman)