The current administration has introduced a 25% tax on foreign steel and aluminum, reminiscent of similar measures taken during the former president’s tenure. This move aims to bolster U.S. metal producers who have been struggling against fierce global competition. The announcement sparked a rise in stock prices among steel and aluminum manufacturers, with companies like Nucor increasing by 5.6%, Cleveland-Cliffs surging by 17.9%, and Alcoa gaining 2.2%.
However, the previous round of tariffs also had negative consequences, straining relations with key allies while increasing costs for domestic manufacturers that rely on steel and aluminum. Timothy Zimmerman, the CEO of Mitchell Metal Products based in Merrill, Wisconsin, recalls the significant challenges his company faced due to skyrocketing steel prices during the last tariff implementation. He noted, “We were significantly impacted. The challenges we faced were unprecedented, with steel prices rising about 70% over a short period.”
Despite negotiating contracts with various clients—ranging from furniture manufacturers to telecommunications firms—Mitchell Metal Products was unable to pass on the steep costs associated with the tariffs, resulting in squeezed profit margins and lost business to European competitors not affected by such taxation.
Despite these challenges, the overall economic impact of the tariffs on the U.S. economy—which stands close to $30 trillion—was limited in the past and is expected to be so again due to the relatively small proportion of steel and aluminum imports. However, experts at Capital Economics, Jennifer McKeown and Hamad Hussain, have indicated that the revised tariffs could increase inflation in the U.S. and affect global economic growth negatively this year.
These tariffs will affect U.S. allies, including Canada, Mexico, Japan, and South Korea, as they are significant suppliers of steel and aluminum to the U.S. While China is often pointed to as a major contributor to global steel supply issues, its market share in U.S. steel imports is minimal, accounting for less than 2%.
The tariffs were originally enacted using Section 232 of the Trade Expansion Act of 1962, which permits the president to impose trade restrictions for national security reasons. The introduction of the tariffs in 2018 led to significant backlash from Canada and Mexico, who resented the labeling of their goods as threats to U.S. security. In retaliation, these countries placed tariffs on a variety of U.S. goods, including bourbon and Levi’s jeans.
While the tariffs allowed U.S. steel suppliers to increase their prices and continue production, they adversely impacted downstream businesses, including those like Zimmerman’s firm. A 2023 report from the U.S. International Trade Commission revealed that while steel and aluminum production rose, downstream production fell by nearly $3.5 billion. This offset much of the previously mentioned gains in the steel industry.
A 2020 study from Harvard and the University of California, Davis, highlighted a troubling fact: the tariffs created only around 1,000 jobs while resulting in a loss of 75,000 jobs elsewhere. Once employing 102 workers at its peak, Mitchell Metal Products has reduced its workforce to approximately 75 as it struggles to cope with the economic pressures imposed by the tariffs.
Gary Hufbauer from the Peterson Institute for International Economics pointed out that Trump’s earlier trade policies, including the tariffs on many Chinese imports, severely burdened American industries. He expects similar repercussions from the current tariffs, suggesting that they could lead to a reduction in U.S. manufacturing employment once again.
Although some exceptions to the 2018 tariffs were eventually lifted, they are now reinstated. Trump reimposed the full 25% levy on aluminum previously set at 10%. As the latest tariffs loom, Zimmerman is preparing for their impact, noting imminent price increases announced by several large domestic steel mills that seem unrelated to any surge in demand.
“I believe that domestic producers will replicate the price hikes seen in 2018,” he stated. To mitigate the impact on his business, Mitchell Metal Products plans to proactively discuss cost absorption with clients. Zimmerman concluded with a cautionary note, indicating, “It’s not a healthy place to be as a company.”
