The US and Europe dug in for a bitter trade fight after President Donald Trump gave allies only a one-month reprieve from his steel and aluminium tariffs, with Washington demanding concessions from the EU as Brussels vowed not to be held to ransom.

Mr Trump’s eleventh-hour decision to give the EU, Canada and Mexico a second 30-day reprieve from the tariffs, which had been due to take effect on Tuesday, failed to defuse transatlantic tensions, with both sides at loggerheads over how to make the exemptions permanent.

The dispute, along with the threat of a US-China trade war over Mr Trump’s tariffs, has sent jitters through the financial markets and prompted top officials at the International Monetary Fund and the European Central Bank to warn of a wave of protectionism that could stamp out the global recovery.