WASHINGTON – President Donald Trump announced on Wednesday an elevation in tariffs on steel and aluminum imports, raising them to 25%. Trump asserts that this measure will foster job creation in American factories. However, this move comes amid fluctuating tariff threats that have unsettled stock markets and heightened fears of an economic slowdown.
Following a directive from February, Trump withdrew all exemptions to his 2018 tariffs and increased the tariff on aluminum from 10% to 25%. This decision is part of a broader strategy to reform global trade. Beyond this, the administration has already imposed tariffs on Canada, Mexico, and China, with future plans to target imports from the European Union, Brazil, and South Korea with “reciprocal” rates set to begin on April 2.
In a discussion with CEOs during the Business Roundtable on Tuesday, Trump maintained that the tariffs were inciting companies to invest in U.S. manufacturing plants. Despite an 8% drop in the S&P 500 index over a month attributed to concerns about economic growth, Trump suggested that increased tariff rates would serve as a better impetus for reviving manufacturing.
“The higher it goes, the more likely it is they’re going to build,” he remarked. “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.”
On Tuesday, Trump considered imposing 50% tariffs on steel and aluminum from Canada but decided to maintain the 25% rate after Ontario halted plans for a surcharge on electricity sales to Michigan, Minnesota, and New York.
This initiative is partly an attempt by the president to address unresolved issues from his first term. Even though the 2018 tariffs resulted in increased duties, the overall revenue for the federal government was insufficient to significantly impact inflation.
Previously, Trump’s 2018 tariffs on steel and aluminum allowed for exemptions, reducing their effectiveness. When Canada and Mexico agreed to a revised North American trade agreement in 2020, they were exempt from these tariffs. Additionally, some U.S. trade partners substituted quotas for tariffs. The initial Trump administration also permitted U.S. businesses to seek tariff exemptions if domestic steel sources were unavailable.
While these tariffs might bolster U.S. steel and aluminum production, they could also lead to higher costs for manufacturers using these metals as raw materials.
Economists have observed that the increased costs imposed on “downstream” manufacturers that utilize steel and aluminum offset the gains secured by these tariffs. In 2021, production by downstream companies decreased by nearly $3.5 billion, a downturn surpassing the $2.3 billion growth in production from aluminum and steel manufacturers, as reported by the U.S. International Trade Commission in 2023.
Trump envisions the tariffs catalyzing the establishment of more domestic factories. The White House has highlighted that companies like Volvo, Volkswagen, and Honda are considering expanding their U.S. operations. Yet, higher costs could potentially deter some firms 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?” questioned John Murphy, a senior vice president at the U.S. Chamber of Commerce.
