President Donald Trump officially increased tariffs on all steel and aluminium imports to 25 per cent on Wednesday, promising that the taxes would help create US factory jobs at a time when his seesawing tariff threats are jolting the stock market and raising fears of an economic slowdown.
Trump removed all exemptions from his 2018 tariffs on the metals, in addition to increasing the tariffs on aluminium from 10 per cent. His moves, based off a February directive, are part of a broader effort to disrupt and transform global commerce.
The Republican president has separate tariffs on Canada, Mexico and China, with plans to also tax imports from the European Union, Brazil and South Korea by charging “reciprocal” rates starting on April 2.
The EU announced its own countermeasures on Wednesday. European Commission President Ursula von der Leyen said that as the United States was “applying tariffs worth 28 billion dollars, we are responding with countermeasures worth 26 billion euros,” or about $28 billion.
Those measures, which cover not just steel and aluminium products but also textiles, home appliances and agricultural goods, are due to take effect on April 1.
Canada is the largest foreign supplier of steel and aluminium to the United States and responded with its own countermeasures.
It plans to impose retaliatory tariffs of Canadian $29.8 billion ($20.7 billion) starting Thursday in response to the US taxes on the metals. Canada’s new tariffs would be on steel and aluminium products, as well as US goods including computers, sports equipment and water heaters worth $14.2 billion Canadian ($9.9 billion).
“We will not stand idly by while our iconic steel and aluminium industries are being unfairly targeted,” said Canadian Finance Minister Dominic LeBlanc.
Canada’s new tariffs are in addition to its 25 per cent counter tariffs on $30 billion Canadian (US$20.8 billion) of imports from the US that were put in place on March 4 in response to other Trump import taxes that he’s partially delayed by a month.
Trump told CEOs in the Business Roundtable on Tuesday that the tariffs were causing companies to invest in US factories. The 8 per cent drop in the S&P 500 stock index over the past month on fears of deteriorating growth appears unlikely to dissuade him, as Trump argued that higher tariff rates would be more effective at bringing back factories.
“The higher it goes, the more likely it is they’re going to build,” Trump told the group. “The biggest win is if they move into our country and produce jobs. That’s a bigger win than the tariffs themselves, but the tariffs are going to be throwing off a lot of money to this country.”
Trump on Tuesday threatened to put tariffs of 50 per cent on steel and aluminium from Canada, but he chose to stay with the 25 per cent rate after the province of Ontario suspended plans to put a surcharge on electricity sold to Michigan, Minnesota and New York.
In many ways, the president is addressing what he perceives as unfinished business from his first term. Trump meaningfully increased tariffs, but the revenues collected by the federal government were too small to significantly increase overall inflationary pressures.
Trump’s 2018 tariffs on steel and aluminium were eroded by exemptions.
After Canada and Mexico agreed to his demand for a revamped North American trade deal in 2020, they avoided the import taxes on the metals. Other US trading partners had import quotas supplant the tariffs. And the first Trump administration also allowed US companies to request exemptions from the tariffs if, for instance, they couldn’t find the steel they needed from domestic producers.
While Trump’s tariffs could help steel and aluminium plants in the United States, they could raise prices for the manufacturers that use the metals as raw materials.
Moreover, economists have found, the gains to the steel and aluminium industries were more than offset by the cost they imposed on “downstream” manufacturers that use their products.
At these downstream companies, production fell by nearly $3.5 billion because of the tariffs in 2021, a loss that exceeded the $2.3 billion uptick in production that year by aluminium producers and steelmakers, the US International Trade Commission found in 2023.
Trump sees the tariffs as leading to more domestic factories, and the White House has noted that Volvo, Volkswagen and Honda are all exploring an increase to their US footprint. But the prospect of higher prices, fewer sales and lower profits might cause some companies to refrain from investing in new facilities.
“If you’re an executive in the boardroom, are you really going to tell your board it’s the time to expand that assembly line?” said John Murphy, senior vice president at the US Chamber of Commerce.
The top steel exporters to the US are Canada, Mexico, Brazil, South Korea and Japan, with exports from Taiwan and Vietnam growing at a fast pace, according to the International Trade Administration. Imports from China, the world’s largest steel producer, account for only a small fraction of what the US buys.
The lion’s share of US aluminium imports comes from Canada.
