Donald Trump on brink of trade war with Europe as key allies react in fury to tariffs on steel and aluminium

Donald Trump: The US is set to impose trade tariffs on Europe
AP

The US and its allies are on the brink of a trade war after Europe reacted in fury as Donald Trump imposed tariffs on steel and aluminium producers.

The controversial move drew immediate vows for retaliation from Europe, Mexico and Canada as stock prices slumped amid the heightened tensions on Thursday.

International Trade Secretary Liam Fox dismissed American claims the tariff, along with a 10 per cent levy on aluminium, was needed for national security reasons.

Mr Fox signalled the UK was prepared for "tit-for-tat" action, saying: "We absolutely do not rule out counter measures.

Liam Fox, International Trade Secretary, signalled that Britain was prepared for 'tit-for-tat' action
AFP/Getty Images

"Obviously, we still hope the United States will think again about this. But, it would be a great pity if we ended up in a tit-for-tat trade dispute with our closest allies."

Jean-Claude Juncker, president of the European Commission said of the US leader’s decision to levy tariffs: "This is protectionism, pure and simple.”

French President Emmanuel Macron branded the tariffs, which come into force at midnight, "illegal" and a "mistake."

French President Emmanuel Macron branded the tariffs 'illegal'
AP

He ominously recalled the pre-World War 2 period saying: "Economic nationalism leads to war. This is exactly what happened in the 1930s."

US President Mr Trump had originally imposed the tariffs in March, saying a reliance on imported metals threatened national security.

But he exempted Canada, Mexico and the European Union to buy time for negotiations, a reprieve now set to expire.

Other countries, including Japan, America's closest ally in Asia, are already paying the tariffs.

The administration's actions drew fire from Europe, Canada and Mexico and promises to quickly retaliate against U.S. exports.

The import duties threaten to drive up prices for American consumers and companies and are likely to heighten uncertainty for businesses and investors around the globe.

Stock prices slumped amid fears of a trade war, with the Dow Jones industrial average falling nearly 252 points, or 1 percent, to 24,415.84.

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