President Donald Trump officially increased tariffs on all steel and aluminum imports to 25% on Wednesday, pledging that taxes will help create jobs for U.S. factories when stock threats are shaking stock markets and causing fears of economic slowdowns.
In addition to increasing the tariff on aluminum from 10%, Trump removed all exemptions from 2018 tariffs on metals.
His move, based on the February directive, is part of a broader effort to disrupt and transform global commerce.
The US President has separate tariffs on Canada, Mexico and China, and plans to tax imports from the European Union, Brazil and South Korea from April 2nd by charging “mutual” fees.
Trump told Business Roundtable CEO on Tuesday that tariffs have led businesses to invest in U.S. factories.
A 8% drop in the S&P 500 stock index on fear of growth worsening seems unlikely to give him a opinion, as Trump argued that higher tariff rates would be more effective in reviving factories.
“The higher it is, the more likely they are to build,” Trump told the group. “The biggest victory is whether they move to our country and create jobs. It's a bigger victory than the tariffs themselves, but tariffs will throw a lot of money on this country.”
Trump on Tuesday threatened to put 50% tariffs on Canada's steel and aluminum, but he chose to stay at the 25% rate after Ontario halted plans to charge additional charges on electricity sold to Michigan, Minnesota and New York.
In many respects, the President is working on what he sees as an unfinished business from his first semester.
Trump has increased tariffs significantly, but the revenue collected by the federal government was too small to significantly increase overall inflationary pressure.
Trump's 2018 tariffs on steel and aluminum were eroded by exemptions.
They avoided import taxes on metals after Canada and Mexico agreed to a request for an improved North American trade agreement in 2020.
Other US trading partners had import quotas to replace tariffs. Also, the first Trump administration allowed US companies to request a tariff exemption if, for example, they were unable to find the necessary steel from domestic producers.
Trump's tariffs could support US steel and aluminum plants, but could raise prices for manufacturers using metal as raw materials.
Furthermore, economists found that the benefits of the steel and aluminum industries were offset by the costs imposed on “downstream” manufacturers using the products.
These downstream companies saw their production drop nearly $3.5 billion due to tariffs in 2021. This is a loss that exceeded a $2.3 billion increase in production by the US International Trade Commission's aluminum producers and steel manufacturers discovered in 2023.
Trump believes tariffs will lead to more domestic factories, and the White House notes that Volvo, Volkswagen and Honda are all investigating an increase in the US footprint.
However, due to rising prices, lower sales and lower profits, some companies may refrain from investing in new facilities.
“If you're a meeting room executive, are you really going to tell your board it's time to expand that assembly line?” said John Murphy, senior vice president of the U.S. Chamber of Commerce.
