NEW YORK (Reuters) - Stocks tumbled on Wall Street while the U.S. dollar fell on Thursday after President Donald Trump said the United States would impose tariffs on steel and aluminum imports, sparking fears of a harmful global trade war.

FILE PHOTO: An employee of a bank counts US dollar notes at a branch in Hanoi, Vietnam May 16, 2016. REUTERS/Kham/File Photo

U.S. steelmaker stock prices jumped on the news after Trump vowed to rebuild American steel and aluminum industries at a meeting of U.S. industry officials at the White House.

But many stocks fell on concerns industry inputs would be as the cost of imported steel and aluminum rose, pushing up costs for consumers also.

“There’s always a concern with this president that you get into a series of trade wars that would hurt domestic or global growth,” said Phil Orlando, chief equity market strategist at Federated Investors in New York.

“It remains to be seen whether not there’s a response from the foreign government. That’s unknown and the market hates uncertainty,” Orlando said.

Canada said it would retaliate if the United States imposes tariffs on Canadian steel and aluminum products, Foreign Affairs Minister Chrystia Freeland said on Thursday.

Canada’s main stock index fell to a more than two-week low on Thursday, partly on fears about the impact of more protectionist trade policies. [L2N1QJ2EJ]

Chuck Carlson, chief executive at Horizon Investment Services in Hammond, Indiana said the market is nervous about future U.S. inflation and the imposition of tariffs may accentuate those concerns.

“You put a tax on something you are increasing the price, which is inflationary and then what is that going to do with the goods and products that we sell too?” he said.

The three major U.S. stock indices fell more than 1.0 percent as Trump’s tariff announcement added to investors concerns about the pace of Federal Reserve interest rates rises as inflation edges higher.

Federal Reserve Chairman Jerome Powell said on Thursday the U.S. economy does not appear to be overheating, though the head of the New York Fed suggested a faster pace of interest rate increases may still be in the offing for 2018.

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On Wall Street, the Dow Jones Industrial Average closed down 420.22 points, or 1.68 percent, to 24,608.98. The S&P 500 lost 36.16 points, or 1.33 percent, to 2,677.67 and the Nasdaq Composite dropped 92.45 points, or 1.27 percent, to 7,180.56.

Steelmakers AK Steel Holding rose 9.5 percent, U.S. Steel Corp gained 5.8 percent and Nucor rose 3.26 percent.

Shares of Ford Motor dropped 3.0 percent and General Motors fell nearly 4.0 percent. Boeing, Johnson Controls and United Technologies, all users of steel and aluminum, also helped lead the stock prices lower.

MSCI’s gauge of stock performance in 47 countries shed 0.99 percent to close at 512.96. The pan-European FTSEurofirst 300 index of leading regional shares lost 1.26 percent to close at 1,468.47.

European markets had already closed by the time Trump’s comments about tariffs was reported.

The U.S. dollar index fell 0.35 percent, with the euro up 0.55 percent to $1.226. The Japanese yen firmed 0.37 percent versus the greenback at 106.28 per dollar.

The Mexican peso lost 0.06 percent at 18.84 against the greenback, but the Canadian dollar rose 0.07 percent at 1.28 per U.S. dollar.

The gap between short-dated U.S. borrowing costs and those in Germany was at its widest in over 20 years as the monetary policy outlooks by the Fed and European Central Bank for the two regions diverged.

U.S. benchmark 10-year Treasury notes last rose 15/32 in price to push yields lower to 2.8114 percent but are still near four year highs.

U.S. consumer prices increased in January as a gauge of underlying inflation posting its largest gain in 12 months, but a survey showed the euro zone’s factory boom slowed a little further in February, pressuring euro zone yields lower. [L2N1QI1U5]

“In the U.S. we have at least three rate hikes this year, but in the euro zone, there was some exaggeration about where inflation was heading so that is now being priced out and yields are moving to the downside,” said DZ Bank strategist Daniel Lenz.

Crude oil fell more than 1.0 percent, hitting two-week lows on pressure from a strong U.S. dollar and worries that surging U.S. crude output might thwart efforts by the Organization of the Petroleum Exporting Countries to drain global supply.

U.S. crude settled down 65 cents at $60.99 per barrel and Brent fell 90 cents to settle at $63.83.