TLDR
- President Trump imposed sweeping 25% tariffs on all steel and aluminum imports
- European Union retaliated with countermeasures on $28 billion worth of American goods
- Canada faced potential double tariffs but reached last-minute agreement with US
- Steel and aluminum prices have already risen 30% and 15% respectively in anticipation
- These tariffs could cost 100,000 American jobs, including 20,000 in the aluminum industry
President Donald Trump imposed sweeping 25% tariffs on all steel and aluminum imported into the United States on Wednesday. This marks his first worldwide tariff escalation since returning to the White House.
The new policy applies to all countries without exception. Previously, the Biden administration had allowed exemptions for US allies including Canada, Mexico, Japan, and South Korea.
The European Union responded within hours. They unveiled what they called “swift and proportionate” countermeasures on up to €26 billion ($28 billion) worth of American goods exports. These retaliatory tariffs will target US products including boats, bourbon, and motorcycles.
The EU tariffs will come into effect next month. The United States was the second-biggest destination for the EU’s iron and steel exports last year, according to official figures.
More tariffs for China
China faces even steeper tariffs. Chinese steel and aluminum will be taxed at 45%, as the new 25% tariff adds to an existing 20% across-the-board tariff on Chinese imports.
The tariff announcement followed a tense standoff with Canada. Trump had threatened to double the rate on Canadian steel and aluminum imports after Ontario imposed a 25% surcharge on electricity sent to the US.
The situation eased late Tuesday. Ontario Premier Doug Ford agreed to suspend the province’s power tariff after talks with US Commerce Secretary Howard Lutnick.
Canada is America’s top source of metal imports. Last year, the US imported $11.4 billion worth of aluminum and $7.6 billion worth of iron and steel from Canada.
Domestic steel on the increase
Market prices have already reacted to the tariff threats. The price of domestic steel has increased more than 30% in the last two months. The domestic price of aluminum has risen about 15% in the same period.
These price increases could spread across many industries. Steel and aluminum are essential components in cars, appliances, machinery, infrastructure, medical devices, cans, and power lines.
Auto manufacturers are particularly concerned. Cars contain hundreds or thousands of pounds of steel and aluminum. Trump has also promised higher levies on cars assembled in Canada and sold in the US, effective April 2.
Stock markets have shown mixed reactions. Shares of steel and aluminum producers like Alcoa, Cleveland-Cliffs, United States Steel, Nucor, and Steel Dynamics rose following the announcement.
However, Toyota shares dropped 2% on Tuesday. The company manufactures several popular models in Ontario, including the RAV4 and Lexus NX and RX.
Alcohol producers have also been affected. Stock in Brown-Forman and Constellation Brands fell 5% and 2.2% respectively on Tuesday, as these companies could face additional tariffs on their exports.
The tariffs pose economic risks for the US. William Oplinger, CEO of Alcoa, one of the largest US aluminum makers, warned last month that Trump’s tariffs could cost 100,000 American jobs, including 20,000 from the aluminum industry.
Increased costs for cars, tools, and machines
A 2023 analysis by the International Trade Commission found similar effects during Trump’s first term. While the 2018 metals tariffs expanded US production modestly, they increased costs for cars, tools, and machines.
The result was a net decrease in economic output. The tariffs shrank manufacturing industries’ output by more than $3 billion in 2021, according to the Commission’s analysis.
Australian Prime Minister Anthony Albanese criticized the tariffs as “entirely unjustified” and “against the spirit of our two nations’ enduring friendship.” However, he stated that Australia would not impose reciprocal levies.
“Tariffs and escalating trade tensions are a form of economic self-harm and a recipe for slower growth and higher inflation,” Albanese said in a statement.
Trump defended the tariffs at a Business Roundtable event on Tuesday. “The higher it goes, the more likely it is they’re going to build,” he said, suggesting that higher tariffs would encourage more companies to move production to the US.
The Commerce Secretary and Canadian officials will meet Thursday to continue discussions. They plan to renegotiate aspects of the free trade treaty known as the USMCA.
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