U.S. President Donald Trump’s latest move imposing 25 per cent levies on all U.S. imports of steel and aluminum came into effect on March 12 as part of his big-ticket agenda to reshape U.S. trade ties with the rest of the world.
Trump’s trade overhaul — along with retaliation from other countries — caused significant market volatility with major indices such as the Nasdaq 100 and S&P 500 posting notable declines. The escalating trade conflict has also heightened fears of a prolonged economic downturn.
This latest move comes after Trump issued 25% blanket tariffs on goods from Canada and Mexico on March 4, although he gave temporary exemptions for a significant number of products. He also doubled levies on goods from China to 20%.
The latest plan revises a tariff regime introduced during the president’s first administration, when steel and aluminum imports were targeted following years of complaints from American companies and labor unions about overseas competition.
What are the new tariffs Trump announced?
Trump’s measures expand upon an existing tariffs regime for metals. Levies for US steel imports were already set at 25%, but previous exemptions enjoyed by some countries have now been revoked. As for aluminum imports, the previous tariff of 10% has increased to 25%.
As well as encompassing metals in their processed form, the levies also now cover a swathe of products made using steel and aluminum that are needed to build automobiles, window frames and skyscrapers. That means these tariffs could have a broad-reaching price impact on US consumers.
Why steel and aluminum?
During Trump’s first successful presidential campaign a decade ago, he railed against the decline of US steel towns and aluminum hubs after decades of falling production and dwindling employment amid China’s rise as the world’s manufacturing superpower.
In 2018, during his first term in the White House, Trump imposed the previous steel and aluminum tariffs with the goal of boosting US output by making foreign material more expensive for American buyers. Several major suppliers including Canada, Mexico and the European Union were ultimately exempted, however. Today, US industries say they’re still struggling to compete with imports.
More broadly, trade frictions in the global steel and aluminum sectors have grown in the past year as more products from China flood the market. That’s prompted trade measures against Chinese imports from numerous places such as Vietnam, India and the EU.
Which countries could be most affected by the metals tariffs?
US net imports make up more than four-fifths of the country’s aluminum requirement, and about 17% of its steel needs, according to figures from Morgan Stanley.
Canada could bear the brunt of tariffs as the top supplier of both metals to its southern neighbor. It accounts for 58% of US aluminum imports by volume, followed by 6% from the United Arab Emirates, and 4% from China, according to figures from the US government. For steel, Canada is again the biggest at 23%, followed by Brazil at 16%, Mexico at 12%, then South Korea at 10%.
What will happen next?
Trump’s record in office — in his first term and so far in his second — suggests there’s room for negotiation. Several exporting nations or regions ultimately won exemptions from the metals tariffs launched in Trump’s first term, while some oil companies also won exclusions based on their need for special products.
This time, however, Trump has signaled that with these steel and aluminum tariffs there is no leeway. Australia failed, at the eleventh hour, to secure an exemption despite a lobbying campaign by the government, in a blow to relations between the two longtime allies. Trump even threatened to double the duties against Canada to 50%, but dialed back to the original plan hours later.
Trump has said he wants to impose tariffs on copper imports and that those would take a bit longer to implement than the ones on aluminum and steel.
Will the tariffs achieve their purpose?
When Trump’s first administration unveiled tariffs on steel and aluminum, the goal was to make the US more self-sufficient in these metals. But in 2024, the output of the US steel industry was 1% lower than it had been in 2017, before the first round of Trump tariffs, and the aluminum industry produced almost 10% less.
Rising costs — especially for labor and energy — have been a major driver in the long-term decline of these industries. Canada plays a vital role in supplying aluminum to the US because its plants often draw on cheap hydropower.
More broadly, economists warn that Trump’s sweeping use of tariffs risks raising household expenses such as groceries and gasoline — potentially stoking the very inflationary pressures the president campaigned on quelling. Administration officials counter that the levies are part of a broader economic strategy — including extended tax cuts and expanded domestic energy production — that will help lower costs overall.
However, the recent slump in the stock market already underscores concerns about the potential for a “Trumpcession”. Wall Street strategists, including those at JPMorgan Chase & Co. and RBC Capital Markets, are tempering their bullish calls for the stock market in 2025 due to Trump’s tariffs and slowing economic growth.
Trump’s tariffs and retaliation by others will shave 0.4% off long-run GDP, economists at Yale’s Budget Lab wrote – “the equivalent of the US economy being permanently smaller by $80-$110 billion annually.”
With assistance from Winnie Zhu, Jennifer A. Dlouhy, Jenny Leonard and Josh Wingrove.
Martin Ritchie and Jessica Zhou, Bloomberg News
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