(Corrects spelling and role of Liu He in paragraph 9)
* Trump says U.S. to apply tariffs next week
* Likely to increase tension with China, Europe as well asCanada
* U.S. already mired in NAFTA trade talks with Canada,Mexico
* Studies show few jobs likely to be created
By Steve Holland and Ginger Gibson
WASHINGTON, March 1 (Reuters) - President Donald Trumpannounced on Thursday he would impose hefty tariffs on importedsteel and aluminum to protect U.S. producers, riskingretaliation from major trade partners like China, Europe andneighboring Canada as well as helping to trigger a large selloffon Wall Street.
Trump said the duties of 25 percent on steel and 10 percenton aluminum would be formally announced next week although WhiteHouse officials later said some details still needed to beironed out.
Trump believes the tariffs will safeguard American jobs butmany economists say the impact of price increases for consumersof steel and aluminum, such as the auto and oil industries, willbe to destroy more jobs than they create.
"We're going to build our steel industry back and ouraluminum industry back," he said.
News of the tariffs drove the stocks of U.S. domestic steeland aluminum makers sharply higher, but also hit sentiment onWall Street due to the potential impact of higher costs onconsumers. move came after what one person with direct knowledge ofthe discussions described as a night of "chaos" in the WhiteHouse due to frequent switching of positions in theadministration.
The threat of tariffs was sharply criticized by some seniorRepublican legislators as well as industries from autos to oilwhose input costs will rise. A major concern is that U.S. farmexports could be hit hard in retaliation by steel-exportingcountries.
RETALIATION
"Every time you do this, you get a retaliation. Agricultureis the number one target. I think this is terriblycounterproductive for the agriculture economy," said Senator PatRoberts, who chairs the chamber's agriculture committee.
China has already threatened to curb imports of U.S.soybeans, while the European Union has said it will consideraction as well. President Xi Jinping's top economic adviser, LiuHe, is in Washington for trade talks. move will not directly hit China that hard, with datashowing that Canada supplies 16 percent of U.S. demand versusChina's 2 percent and is by far the largest steel exporterfollowed by Brazil and South Korea.
"Should restrictions be imposed on Canadian steel andaluminum products, Canada will take responsive measures todefend its trade interests and workers," Foreign AffairsMinister Chrystia Freeland said in a sharply worded statement.
Brazil's industry ministry said it would consider takingaction on its own over the tariffs or in concert with othercountries. Two of its largest steelmakers, Cia SiderurgicaNacional CSNA3.SA and Usiminas USIM5.SA sold off on thetariff news, closing down 4.4 percent and 4.2 percent,respectively.
Washington is already engaged in a dispute with Canada andMexico over its proposed revision to the North American FreeTrade Agreement and months of tense talks have failed to produceany meaningful progress. Asked whether there would be exemptions for any countries,White House spokeswoman Sarah Sanders said she would not getinto any details ahead of next week's announcement. She said thetariffs were still being finalized.
After Trump's statement, AK Steel Holding AKS.N was upalmost 10 percent, U.S. Steel Corp X.N was up over 5 percentand Nucor (NYSE:NUE) NUE.N rose 3.2 percent. By contrast shares of steelconsumers fell with Ford Motor (NYSE:F) Co F.N down over 3 percent andGeneral Motors Co GM.N down almost 4 percent.
The administration says duties would protect U.S. industry,but critics say they would raise costs for industry and fail todeliver on a campaign pledge to boost domestic jobs.
Trump's decision reflected a victory for the trade hawks inhis administration, including White House trade adviser PeterNavarro, who has been rising in importance, and a setback forthose who fear the repercussions of the move, such as topeconomic adviser Gary Cohn.
It had appeared unlikely that Trump would announce thetariffs on Thursday after a night of back and forth inside theadministration.
"There was a lot of movement within the past 12, 16 hours,"said the source who had knowledge of the discussions, but whodeclined to be named due to the sensitivity of the issue.
"It was going to happen. It wasn't going to happen and thenit did happen."
The administration has also cited national securityinterests for its action, saying the United States needsdomestic supply for its tanks and warships. Contrary to theaction announced by Trump on Thursday, the Department of Defensehad recommended targeted steel tariffs and a delay in aluminumduties.
Although China only accounts for two percent of U.S. steelimports, its massive industry expansion has helped produce aglobal glut of steel that has driven down prices.
Trade tensions between the United States and China haverisen since Trump took office in 2017 and the administration isalso pushing on what it regards as forced technology transfersto China.
FEW MORE JOBS FROM TARIFFS
While American steelmakers have lost three quarters of theirjobs between 1962 and 2005, a major study by the AmericanEconomic Association showed that much of this had been due toimproved production technology as output per worker rosefivefold.
"Thus, even if trade protection leads to increased domesticproduction, increases in employment may be far less than manyhope," a report from the independent Econofact economist networksaid last week.
Econofact said in its report that two million jobs were inindustries that use steel "intensively", including auto parts,household appliances, farm machinery and oil equipment.
"Across many states, the number of jobs adversely affectedin these steel-using industries could far exceed any steel jobssaved," Econofact warned.
The overall impact on the U.S. economy is likely to bemuted, barring a major trade war, with steel and aluminumimports accounting for just two percent of the overall total.
Investment bank Barclays (LON:BARC) estimated the tariffs would add 0.1percentage point to core inflation over a period of time and cuteconomic growth by 0.1-0.2 percentage points, which would bemore than offset by Trump's fiscal stimulus.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^INSTANT VIEW-Trump says U.S. to impose tariffs on steel,aluminum imports