Dive Brief:

• The European Union, Canada and Mexico will no longer be exempt from U.S. tariffs on steel and aluminum, as talks to avert such restrictions stalled this week, the New York Times reports.
• The 25% steel and 10% aluminum import taxes will go into effect after midnight tonight, as the 30-day temporary exemption granted last month expires June 1.
• Retaliation over the tariffs is expected. The European Union has held a firm stance against the measures from day one, and on Tuesday Canadian representatives said the country was ready to "respond appropriately" to any trade action by the U.S.

Dive Insight:

U.S. business should prepare for a full-blown trade war as retaliation from tariffs imposed this week may now elicit responses not just from China, but also some of the U.S.' closest allies.

Canada is one of the top three exporters of steel to the United States, and as such is unlikely to ignore the move. Canada's Prime Minister Justin Trudeau and Foreign Minister Chrystia Freeland have already scheduled a press conference at 1:30 p.m. ET to announce their next steps.

The EU, meanwhile, released a series of statements in reaction.

"This is protectionism, pure and simple," said Jean-Claude Juncker, president of the European Commission. "The US now leaves us with no choice but to proceed with a WTO dispute settlement case and with the imposition of additional duties on a number of imports from the US. We will defend the Union's interests, in full compliance with international trade law."

At press time, Mexico had yet to officially respond to the news.

However, Moisés Kalach, business representative to the NAFTA talks, demanded the nation react to the tariffs this morning.

"We don't like the direction that we are headed, we don't like what we see, but it is what it is," he said in Spanish during an interview with Televisa. "We cannot control the reactions by the government of Mexico, but we can control how we react to them." 

The comments suggest the tariffs will become another sticking point in an already complex and stalled renegotiation of the North American Free Trade Agreement (NAFTA).

Kalach's comments also emphasize the proactive role steel importers and exporters will have to play to adapt to the tariffs. Steel prices were already skyrocketing in the first quarter, over speculation on tariffs. As of June 1, supply chain managers may see even steeper fluctuations.