President Donald Trump said Thursday that he would soon impose tariffs of 25% on steel imports and 10% on aluminum imports from countries around the world. Analysts agree the tariffs themselves are likely to have minimal impact as steel and aluminum account for about 2% of imported goods.

Rather, analysts worry that the response from U.S. trading partners could be major.

“The big issue there is if there’s retaliatory tariffs … that would become a big issue if that happens,” Jim Paulsen, chief investment strategist at Leuthold Group, said in a phone interview. “If a lot of countries got involved, it’s a dangerous slope that [Trump is] playing here.”

Goldman Sachs said in a note to clients that the tariffs, if finalized as currently proposed, would be “the most substantial trade restriction the Administration has announced to date.”

Retaliation

While much of Trump’s rhetoric on “unfair” trade deals has been directed at China, much of the steel and aluminum imported to the United States actually comes from Canada, Mexico and other countries in the Americas. U.S. trading partners have already started to respond.

Canadian Trade Minister Fran?ois-Philippe Champagne called the tariff proposal “unacceptable,” with the German Steel Association saying that the proposal would violate World Trade Organization rules.

The European Union announced it would react firmly and unveil “countermeasures” against American goods in retaliation to the tariffs. European Commission President Jean-Claude Juncker said retaliatory policies would be announced “in the next few days” in order to “rebalance” the trade situation between European and the US following the move by Trump.

“This is the risk – that you impose these measures and then other countries respond,” Michael Gapen, chief U.S. economist at Barclays, told Yahoo Finance by phone. “So it’ll have more adverse affects than what we put down but we’d need to know what the retaliations are going to be to have specific analysis.”

In a note to clients, Barclays analysts had said they expected the tariffs themselves to reduce U.S. gross domestic product growth by 0.1-0.2 percentage points. (The most recent reading of U.S. GDP was 2.5% annual growth in the fourth quarter of 2017. A decline of 0.1 or 0.2% would be a small percentage but over time would represent hundreds of billions of dollars.)

The risk of retaliation was likely a known one for the Trump administration. German deputy economy minister Matthias Machnig said on Tuesday that the introduction of tariffs, an idea floated by the Commerce Department had floated earlier in the week that got tacit early approval from Trump, was incompatible with World Trade Organization (WTO) rules and unjustifiable on national security grounds.

“I said we are preparing all options,” Machnig told reporters, adding there was unanimous agreement that the European Commission and member countries “need to take appropriate precautions.”

The EU is targeting products with political punch, revisiting a list compiled during George W. Bush-era trade disputes of symbolic American brands. Potentially in the EU’s sights as targets for tariffs are items such as Harley Davidson motorcycles, bourbon and agricultural exports such as cheese, orange juice, tomatoes and potatoes.

China’s response could be even more harsh because of the scale of trade between the two countries. CNBC reported that China’s Ministry of Commerce is already investigating whether to limit imports of U.S. sorghum, a cereal grain used to feed livestock, in response to previous tariffs from the White House on solar panels and washing machines.

“It’s important to remember that Chinese trade representatives are in the U.S. this week,” said Gapen. “So I don’t think we can fully discount that this is a negotiating tactic. Then again this has been part of their agenda for some time and if they aren’t able to extract some concessions maybe this stays.”

Then-President George W. Bush instituted steel tariffs in 2002 and the results were less than stellar. Less than a year after the tariffs were announced the WTO ultimately ruled that they violated international trade agreements, opening the door for sanctions and retaliation, and the EU threatened retaliation.

Analysts from Capital Economics noted that Bush was soon forced to lift the 2002 tariffs and that though China currently accounts directly for only a minor share of U.S. steel imports, due to existing trade barriers, it is by far the world’s largest producer.

“Officials are apparently now weighing up retaliatory restrictions on US agricultural products,” analysts said in a note. “Mexico and Canada would presumably respond if these tariffs are applied to their steel production too, since they would be incompatible with NAFTA rules.”

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Dion Rabouin is a markets reporter for Yahoo Finance. Follow him on Twitter: @DionRabouin.

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