The European Union has hit back at US President Donald Trump's threat to unleash a trade war over steel and aluminium.

The European bloc suggested it will impose tariffs of its own and has even drawn up a list of US products it will apply them to if Mr Trump follows through on his plan.

Here's how the world reacted to the announcements and the potential of a trade war.

Trump said he wants a tariff on steel and aluminium

Mr Trump has announced a 25 per cent tariff on steel imports and 10 per cent on aluminium, without exemptions for any countries.

"When a country [US] is losing many billions of dollars on trade with virtually every country it does business with, trade wars are good, and easy to win," Mr Trump tweeted.

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He said his tariffs plan would safeguard American jobs in the face of cheaper foreign products and would be formally announced next week.

It's sparked an international outcry, particularly since the US is the world's biggest steel importer — buying 35.6 million tonnes in 2017.

Then Europe threatened a tariff on Harley-Davidson, bourbon and Levi's

The president of the EU's governing body, Jean-Claude Juncker, said the 28-nation trade bloc will retaliate if Mr Trump follows through.

The EU has spoken of countermeasures to the decision, including a list of US products on which to apply tariffs if Mr Trump follows through on his plan.

"We will put tariffs on Harley-Davidson, on bourbon and on blue jeans — Levi's," Mr Juncker told German television.

But it says it will conform with World Trade Organisation (WTO) rules, meaning such measures would have to apply to imports from all countries and could also hit producers including China, India, Russia, South Korea and Turkey.

Other countries are now considering tariffs as well

Canada, China, Japan and Mexico are also considering if they will retaliate.

"These tariffs are very likely to accelerate a tit-for-tat approach on trade, putting US agricultural exports in the crosshairs," executive director of Farmers for Free Trade, a group defending NAFTA at the talks, Brian Kuehl said.

China has urged the US to "show restraint" in using protective trade measures, and has options if it does consider tariffs on US imports, including suppliers of soybeans, the biggest American export to China.

A curb on purchases could hurt farm state voters who supported Mr Trump.

Increased production in China has helped produce a global glut of steel that has driven down prices. ( Reuters: Thomas Peter )

Canada is the largest supplier of both steel and aluminium to the US, supplying 16 per cent of US demand for steel.

Foreign Minister Chrystia Freeland said they were prepared to take responsive measures to defend its trade interests, but industry insiders say it has limited leverage to counter the plan, with officials attempting to secure an exemption from the tariffs.

Japan's Trade and Industry Minister Hiroshige Seko had this to say: "We don't think imports from Japan, an ally, have any effect at all on US national security."

South Korean trade envoy Kim Hyun-chong met with Mr Trump's chief economic adviser, Gary Cohn, and Commerce Secretary Wilbur Ross to "strongly demand" they keep the impact on local companies to a minimum, according to a Trade Ministry statement.

Brazil's Industry Ministry said it would consider taking action on its own over the tariffs or in concert with other countries, and one Mexican official said earlier this week that Mexico would hit back if subject to US tariffs.

Will this mean the cost of things will rise?

Donald Trump wants to revive the US steel and aluminium industries. ( Reuters: Eric Thayer )

Most likely. Many economists say there will be price increases for steel and aluminium consumers, such as the auto and oil industries.

There's also fears it could lead to price hikes in cars and construction equipment.

But Peter Navarro, a White House adviser with largely protectionist views on trade and author of a book entitled Death By China, doesn't think it will rise by much.

He said a 10 per cent tariff on aluminium would add 1 cent to the cost of a can of beer, $45 to a car and $20,000 to a Boeing 727 Dreamliner.

"Big price effects? Negligible price effects," he told Fox News.

But home appliance maker Electrolux said it was delaying a $250 million expansion of its plant in Tennessee as it was worried US steel prices would rise and make manufacturing there less competitive.

"What Wilbur Ross doesn't realise is that a few cents on 115 billion food and general line cans is a lot of money," the president of the Can Manufacturers Institute in Washington, Robert Budway, said.

Beer brewing company MillerCoors also warned "this action will cause aluminium prices to rise and is likely to lead to job losses across the beer industry".

And will this cause a trade war?

It's certainly being viewed as a threat to the international trade system. Mr Trump's steel and aluminium tariff announcement was the most wide ranging and provocative to date.

There's also the prospect of more to come, with the US Government holding an investigation into alleged theft of intellectual property by China.

"The WTO is clearly concerned at the announcement of US plans for tariffs on steel and aluminium," said the organisation's director general Roberto Azevedo.

"The potential for escalation is real, as we have seen from the initial responses of others.

"A trade war is in no-one's interests. The WTO will be watching the situation very closely."

And those expecting this to all blow over, might need to think again.

According to a policy research group in Washington, Capital Alpha Partner, a quick reversal by Mr Trump was highly unlikely.

"We also don't see a chance for fine tuning, exceptions, carve outs, or a country-by-country policy" in the short term, the group said in a research note.

"We would be hopeful that the policy could be modified in time."

ABC/wires