President Donald Trump on Monday removed the exceptions and exemptions from his 2018 tariffs on steel, meaning that all steel imports will be taxed at a minimum of 25%. Trump also hiked his 2018 aluminum tariffs to 25% from 10%.
“We were being pummeled by both friend and foe alike,” Trump said as he signed two proclamations changing his orders during his first term that go into effect on March 4. “It’s time for our great industries to come back to America.” The moves are part of an aggressive push by the president to reset global trade, with Trump saying that tax hikes on the people and companies buying foreign-made products will ultimately strengthen domestic manufacturing. But the tariffs would hit allies as the four biggest sources of steel imports are Canada, Brazil, Mexico and South Korea, according to the American Iron and Steel Institute.
Trump also intends this week to reset US taxes on all imports to match the same levels charged by other countries. All of that comes on top of the 10% tariffs he already put on China, China’s retaliatory tariffs that started Monday and the US tariffs planned for Canada and Mexico that have been suspended until March 1.
Monday’s tariffs almost immediately drew criticism from Canada, the largest source of steel imports. Candace Laing, president and CEO of the Canadian Chamber of Commerce, said that Trump was a destabilizing force in the global economy.
“Today’s news makes it clear that perpetual uncertainty is here to stay,” said Laing.
The tariffs carry inflation risks at a moment when voters are already weary of high prices and fearful that price increases will eclipse any income gains. Trump maintains that the tariffs will level the playing field in international trade and make U.S. Factories more competitive, such that any pain felt by consumers and businesses would eventually be worthwhile.
“’Fairness’ is in the eye of the beholder, but the more fundamental question is whether the US actually benefits from such new tariffs,” Benn Steil, director of international economics at the Council on Foreign Relations, a New York-based nonpartisan think tank, said in an email. “The costs to the US will include higher prices to U.S. Consumers, retaliatory tariffs abroad, and the loss of US jobs and competitiveness in firms hit by higher input costs.” Steil noted that other countries are already adopting Trump’s approach from his first term as the president imposes tariffs on the premise that the imports create national security risks. That’s because national security-related tariffs are legally unchallengeable at the World Trade Organization, meaning that so far Trump’s approach has encouraged other countries to increase trade barriers.
“Not surprisingly, everything from door frames’ to alcoholic beverages’ have of late been subject to new import barriers in the developing world on the grounds of national security,” Steil said.
Of the roughly 29 million net tons of steel imported into the United States last year, a little under 2% came from China. But the White House maintains that exemptions to the tariffs provided over the previous four years by the Biden administration enabled steel and aluminum from China and Russia to go through other nations to reach the United States.
While the tariffs could help the finances of steel mills and aluminum smelters, they could also increase costs for the manufacturers that use the metals as raw materials to make autos, appliances and other products.
Glenn Stevens Jr., executive director of MichAuto, said that the auto industry would likely need to raise prices in response to the tariffs. In turn, higher prices would decrease sales and hurt company’s bottom lines, leading to fewer factory jobs.
“If you look at sudden tariffs to a system, there isn’t a lot of good that comes out of that,”said Stevens, his remarks challenging Trump’s own statements that his policies would stimulate massive gains in auto industry jobs.
The White House has yet to fully counter economic analyses showing that tariffs would hurt growth and intensify inflation, only saying that such analyses are incomplete without including the full extent of Trump’s planned income tax cuts and regulatory curbs. But Trump has yet to propose a budget plan that would flesh out his policies so that economists can judge them.
Consumers already appear to be anticipating that inflation will become a bigger problem. On Friday, the preliminary February results from the University of Michigan Survey of Consumers found that year-ahead inflation expectations jumped to 4.3% from 3.3% a month prior.
The government inflation report scheduled to be released on Wednesday is expected by economists to show consumer prices rising at 2.8%, which would suggest that the public sees tariffs as a major risk to their financial wellbeing.
The stock prices of steel companies climbed sharply on Monday as investors assumed the tariffs would increase their profits. Cleveland-Cliffs, which wants to buy Pittsburgh’s U.S. Steel, rose 13% in morning trading. U.S. Steel climbed 4%.
