WASHINGTON (AP) — President Donald Trump formally raised tariffs on all steel and aluminum imports to 25% on Wednesday, asserting that these taxes would facilitate the creation of factory jobs in the U.S. at a time when his volatile tariff policies are disturbing the stock market and heightening concerns of an economic downturn.
Trump eliminated all exemptions from his 2018 tariffs on these metals and increased aluminum tariffs from 10%. His actions, rooted in a directive from February, are part of a larger strategy to disrupt and reshape global trade. The U.S. president has distinct tariffs on Canada, Mexico, and China, with plans to also impose taxes on imports from the European Union, Brazil, and South Korea at “reciprocal” rates starting on April 2.
During a meeting with CEOs of the Business Roundtable on Tuesday, Trump claimed that the tariffs were prompting companies to invest in U.S. manufacturing. The S&P 500 index’s 8% decline over the last month due to worries about diminishing growth does not seem to deter him; Trump contended that increased tariff rates would more effectively encourage the return of factories.
“The higher it goes, the more likely it is they’re going to build,” Trump stated to the group. “The biggest victory is if they come into our country and create jobs. That’s a bigger win than the tariffs themselves, but the tariffs are going to generate a lot of revenue for this country.”
On Tuesday, Trump threatened to impose tariffs of 50% on steel and aluminum from Canada, but opted to maintain the 25% rate after the province of Ontario halted plans to impose a surcharge on electricity sold to Michigan, Minnesota, and New York.
In many respects, the president is tackling what he perceives as unfinished business from his initial term. Trump significantly raised tariffs, yet the revenue collected by the federal government fell short of significantly driving overall inflationary pressures.
Trump’s 2018 tariffs on steel and aluminum were diminished by exemptions.
Once Canada and Mexico acquiesced to his demand for a revised North American trade agreement in 2020, they successfully avoided the import taxes on metals. Other trading partners of the U.S. had import quotas replace the tariffs. Additionally, the first Trump administration permitted U.S. companies to seek exemptions from the tariffs if, for example, they were unable to source the steel they needed domestically.
While Trump’s tariffs might bolster domestic steel and aluminum facilities, they could elevate costs for manufacturers who use these metals as raw materials.
Furthermore, economists have determined that the benefits for the steel and aluminum sectors were outweighed by the costs imposed on “downstream” manufacturers that utilize their products.
At these downstream businesses, production diminished by nearly $3.5 billion due to the tariffs in 2021, surpassing the $2.3 billion increase in production that year by aluminum producers and steelmakers, according to a 2023 report from the U.S. International Trade Commission.
Trump envisions the tariffs as a catalyst for more domestic manufacturing, and the White House has observed that Volvo, Volkswagen, and Honda are all considering expanding their presence in the U.S. However, the likelihood of price increases, reduced sales, and lower profits may lead some companies to hesitate in investing in new facilities.
“If you’re an executive in the boardroom, are you truly going to tell your board it’s the right time to expand that assembly line?” questioned John Murphy, senior vice president at the U.S. Chamber of Commerce.
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