President Trump's extensive tariffs on foreign steel and aluminum came into effect on Wednesday, escalating U.S. trade quarrels with global rivals, including close allies who have withdrawn from close verbals of his trade fines.
Mr. Trump's 25% tariff on metal hits imports into the United States from any country in the world. Many domestic steel and aluminum manufacturers support moves are expected to raise costs for U.S. manufacturers of cars, tin cans, solar panels and other products, potentially slowing down the broader U.S. economy.
Action on metals is just the latest attempt by Mr. Trump to capitalize on tariffs and the U.S. power over foreign government markets. Last week, he imposed huge tariffs on imports from Canada, Mexico and China, accusing those countries of entering the United States of drugs and immigrants entering the United States, and then quickly withdrew some of them. The president threatens to impose other tariffs, including foreign cars and countries he says discriminates against the United States.
His approach has encountered market downturns and has led many American allies to try to decipher what the president really wants. On Tuesday, Mr. Trump threatened to respond to Canadian metal tariffs in response to the tariffs on Canadian metals after Ontario’s previous tariffs. Within hours, Ontario suspended its surcharge and Mr. Trump shrunk his threat.
Metal tariffs and other taxes could once again worsen trade disputes. Foreign governments, including in Canada and Europe, vowed to retaliate by issuing tax collection, which could very well hurt U.S. exporters. Metal tariffs mainly affect U.S. allies: Canada is by far the largest supplier of steel and aluminum in the U.S. Brazil, Mexico, South Korea and Vietnam are also top suppliers of steel, while the United Arab Emirates, Russia and China are the top suppliers of aluminum.
Tariffs have recovered and expanded similar measures Mr. Trump took in 2018, which has sparked several long-running trade wars. Mr. Trump argued that tariffs are needed to protect national security and provide a reliable source of metal for wartime military forces.
In the following years, Mr. Trump and former President Joseph R. Biden Jr. The U.S. metal industry complained that these measures were no longer strong enough to float steel and aluminum smelters.
Kevin Dempsey, president of the American Iron and Steel Institute, said tariffs are very effective compared to one-time trade actions that previously targeted only specific countries or specific products.
“Without these tariffs, it would have been worse for the industry,” Dempsey said.
However, since steel and aluminum are used to produce many other products, raising the price of metals will have a ripple effect throughout the U.S. economy. By increasing the basic input costs of many companies, tariffs could harm manufacturers who ultimately employ Americans far more than steel mills and aluminum smelters, which could lead to Mr. Trump's plans to strengthen U.S. manufacturing.
An economic analysis published by the U.S. International Trade Commission (USTRAC) shows that Mr. Trump's first metal tariff costs outweigh the benefits.
The study found that the metal tariffs imposed in 2018 encourage buyers of steel and aluminum to buy more from U.S. sources, resulting in a rise in domestic prices of metals and boosted U.S. steel production by 2% between 2018 and 2021.
But the analysis also found that tariffs increase production costs for companies that make cars, tools and industrial machinery, so production in these and other downstream industries shrank by about $3.48 billion in 2021. Due to the taxation, the steel and aluminum industries produced only $2.25 billion in metal.
To mitigate these harmful consequences, the Trump administration has expanded its steel and aluminum tariffs this time to include a variety of downstream products or “derivatives” made of steel and aluminum, such as tractor parts, metal furniture and hinges.
Chad Bown, a senior fellow at the Peterson Institute for International Economics, said it was an “implicit acknowledgement” that certain industries suffered due to Mr. Trump's previous tariffs.
He said tariffs create a “cascaded protectionist cycle” where more industries require government safeguards, and once it starts, it may “may be difficult to stop.”
“Where does it end?” asked Mr. Bowen.
The prospect of higher costs has also encouraged other U.S. industries, such as automakers, to lobby for tariffs from their foreign competitors to protect their businesses. Mr. Trump said he plans to impose tariffs on foreign cars on April 2.
For automakers, metal tariffs threaten to raise costs when new cars and trucks are already close to record highs. Edmunds, a market research team, said the average price of new cars in January was over $48,000.
“Affordability has become a major focus for American shoppers with rising prices and interest rates,” said Jessica Caldwell, head of insights at Edmunds.
Robert Budway, president of CAN Manufacturers Institute, said the tariffs will result in higher packaging costs that will eventually pass through U.S. consumers, representing companies that make steel and aluminum cans for food, soda, beer and paint.
Budway said food packaging companies rely more on imported metals and just pay more for them. After Trump first imposed tariffs, the cost of steel could increase by 53% from 2019 to 2024, according to the institute.
“It just makes the price higher,” Budway said.
These measures also seem likely to invite foreign retaliation and rebound U.S. exporters.
Canadian officials said they planned to retaliate and increased tariffs on $30 billion in U.S. goods on 25% of the government taxed Mr. Trump this month.
“The Canadian government is clear on this issue,” said Gabriel Brunet, a spokesman for Treasury Secretary Dominic Leblanc. He said Tuesday that “if the United States moves forward” tariffs on metals or other expenses, “We will be ready to respond firmly and proportionally.”
The European Union has been preparing to oppose tariffs, which they call “economic counterproductive”.
EU Trade Commissioner Maros Sefcovic said in a press conference on Monday that he went to the United States last month to “seek constructive dialogue.”
“In the end, one hand cannot clap,” he said. “The U.S. government does not seem to be involved in reaching the agreement.”
The EU already has a range of tariffs – a 25% tax on products such as U.S. whiskey – which will start at the end of March. According to three diplomats, trade-focused groups in the EU system prepared for different situations for much of last year, although it kept any latest news from its tariff list.
But it’s hard for Europeans to decide how to deal with the threat of tariffs, and European officials have been working to call their U.S. counterparts.
European Commission President Ursula von der Leyen has not spoken alone with Mr. Trump since his tenure. Asked when she might do so at a Sunday press conference, she said: “We will have a private meeting when the time is right.”
Neal E. Boudette Contribution report.
