The Economy Brief – Why the EU could hang Canada out to dry

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.
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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.