The Dow Jones Industrial Average lost 1 percent and the S&P 500 shed 0.69 percent.
The European Commission's top trade official, Cecilia Malmstrom, said they had repeatedly pleaded with U.S. Commerce Secretary Wilbur Ross to forgo the tariffs and try to come up with a joint solution.
The United States, Canada and Mexico have been renegotiating the North American Free Trade Agreement, which governs trade between the three countries. "This is a very strong Canadian action in response to a very bad USA decision".
While not confirming directly that the U.S. would decide to impose tariffs, he said: "It's up to the European Union to decide if it wants to take retaliatory measures".
The administration has argued that foreign production of steel and aluminium has driven down prices and hurt U.S. producers, creating what the Commerce Department has called a national security threat.
Mexico said it would apply penalties to blueberries, pork bellies, grapes and certain types of steel. The interbank rate dropped 0.93% to 19.91 pesos to the dollar, while banks were selling pesos for as much as 20.35 to the dollar. At its low, the peso was at its weakest against the dollar in almost 15 months.
The European Union said it would impose taxes on a number of USA imports, including Harley-Davidson motorcycles, Levi's jeans and Kentucky bourbon.
In response to the announcement, European Commission President Jean-Claude Juncker lamented that today is a bad day for world trade, adding that it is "totally unacceptable that they impose unilateral tariffs on trade - countermeasures will follow".More news: Ubisoft Confirms Assassin’s Creed Odyssey Ahead Of E3 2018
Europe and Mexico reacted to the USA move with their own lists of tariffs on American products, raising fears of a trade war among allies.
From Harley Davidsons to bourbon whiskey, Brussels has vowed to impose tariffs on iconic American products along with steel and aluminum.
Throughout his presidential campaign, Trump accused China of dumping steel on the U.S. market - and said previous presidents had made a series of "bad deals" to promote free trade.
Canadian Prime Minister Justin Trudeau said the Trump administration's argument that the tariffs were necessary for national security reasons was an "affront" to Canada, which has fought alongside the U.S.in numerous armed conflicts.
Mexico and Canada are the state's two biggest trading partners.
"This particular action on steel and aluminum is not about unfair trade practices".
The good news is that the UK's import-heavy economy is more resilient to the impact of tariffs than countries such as China and Germany, who export more goods than they import, says The Daily Telegraph's Matthew Lynn. That in itself would be nothing new, but the targets of these tariffs were what made Trump's announcement surprising.
Tata also caters for carmakers and the packaging and bottling industry in the United States with products it says no domestic steel producer makes.
Ross himself heads to Beijing on Friday where he will attempt to get firm deals to export more United States goods in a bid to cut America's US$375 billion (S$502 billion) trade deficit with China.