* Adds detail on Liu He talks with White House officials
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* Wall St falls on trade war fears; steel makers rise
* Canada ready to defend trade interests if tariffs applied
* Brazil would take action on its own or with others
* 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.
Fears of a trade war triggered a selloff on Wall Street.
Trump said the duties, 25 percent on steel imports and 10percent on aluminum, would be formally announced next week,although White House officials later said some details stillneeded to be ironed out.
Trump believes the tariffs will safeguard American jobs, butmany economists say the impact of price increases for users ofsteel and aluminum, such as the auto and oil industries, willdestroy more jobs than curbs on imports create.
"We're going to build our steel industry back and ouraluminum industry back," Trump said.
Shares of U.S. domestic steel and aluminum makers rallied,but shares of companies ranging from auto makers to airplanemakers fell on the potential impact of the higher costs theywill have to pay for the metals. announcement came after what one person with directknowledge of the discussions described as a night of "chaos" inthe White House due to frequent switching of positions in theadministration.
The tariffs were sharply criticized by some seniorRepublican lawmakers as well as industries ranging from autos tooil to construction equipment. A major concern is that U.S. farmexports could be hit hard in retaliation by steel-exportingcountries.
"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.
CANADA READY TO RESPOND
China has already threatened to curb imports of U.S.soybeans, and the European Union has said it will consideraction as well. President Xi Jinping's top economic adviser, LiuHe, held talks with the Trump administration in Washington onThursday. discussion was described as "frank and constructive", bya White House official, and focused on "ways to ensure fair andreciprocal trade."
Trade tensions between the United States and China haverisen since Trump took office in 2017.
The tariffs will not directly hit China that hard. Datashows that Canada supplies 16 percent of U.S. demand for steelversus China's 2 percent and is by far the largest steelexporter, followed by Brazil and South Korea.
Other countries were already looking at how to respond.
"Should restrictions be imposed on Canadian steel andaluminum products, Canada will take responsive measures todefend its trade interests and workers," the country's foreignaffairs minister, Chrystia Freeland, said in a sharply wordedstatement.
Brazil's industry ministry said Brazil would consider takingaction on its own over the tariffs or in concert with othercountries. Shares of two of its largest steel makers, CiaSiderurgica Nacional CSNA3.SA and Usiminas USIM5.SA , soldoff, 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 toproduce any meaningful progress. 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.
Although China only accounts for a small fraction of U.S.steel imports, its massive industry expansion has helped producea global glut of steel that has driven down prices.
Wall Street trading reflected the divergent impact of thetariffs. Steel makers rose, with AK Steel Holding AKS.N up 9.5percent, U.S. Steel Corp X.N up 5.7 percent and Nucor (NYSE:NUE) NUE.N up 3.3 percent. Companies that are big users of steel fell. FordMotor Co F.N shed 3 percent and General Motors Co (NYSE:GM) GM.N fell4 percent.
But the overall trend was down, with the Dow JonesIndustrial Average .DJI falling 1.7 percent and the S&P 500index .SPX down 1.3 percent.
Though the administration says duties would protect U.S.industry, critics say they would raise costs for industry andfail to deliver on Trump's campaign pledge to boost domesticjobs.
The tariffs were a victory for the trade hawks in Trump'sadministration, including White House trade adviser PeterNavarro, who has been rising in importance, and a setback forthose who fear repercussions, such as top economic adviser GaryCohn.
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 source said.
The administration also cited national security interestsfor its action, saying the United States needs domestic supplyfor its tanks and warships. But the Department of Defense hadrecommended targeted steel tariffs and a delay in aluminumduties.
FEW MORE JOBS FROM TARIFFS
While American steelmakers lost three quarters of their jobsbetween 1962 and 2005, a major study by the American EconomicAssociation showed that much of this reflected improvedproduction technology, with output per worker rising fivefold.
"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.
"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 2 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 point, which would be morethan offset by Trump's fiscal stimulus.
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