President Donald Trump’s increased tariffs on all US steel and aluminum imports came into effect on Wednesday, marking a significant milestone in his administration’s effort to reshape global trade norms in favour of the United States.
The decision restores a 25% tariff on all steel and aluminum imports and extends duties to hundreds of downstream products made from these metals, including nuts, bolts, bulldozer blades, and soda cans.
International Response
The European Commission swiftly announced countermeasures, stating that it would impose retaliatory tariffs on €26 billion ($28 billion) worth of US goods from next month.
Close allies such as Canada, the UK, and Australia criticised the tariffs. Canada is considering reciprocal actions, while British Business and Trade Secretary Jonathan Reynolds stated that “all options were on the table” to safeguard national interests. Australian Prime Minister Anthony Albanese condemned the move as “entirely unjustified” and “against the spirit of our two nations’ enduring friendship” but ruled out retaliatory tariffs.
“Tariffs and escalating trade tensions are a form of economic self-harm and a recipe for slower growth and higher inflation. They are paid by the consumers,” Albanese said.
Key Affected Nations
The tariffs primarily impact Canada, the largest foreign supplier of steel and aluminum to the US, as well as Brazil, Mexico, and South Korea, which had previously benefited from certain exemptions or quotas.
Tensions escalated on Tuesday when Trump threatened to double tariffs on Canadian steel and aluminum exports to 50%. However, he withdrew the threat after Ontario Premier Doug Ford agreed to suspend a planned 25% surcharge on electricity exports to US states. Ford and Canadian Finance Minister Dominic LeBlanc are set to meet US Commerce Secretary Howard Lutnick in Washington on Thursday to discuss revisions to the US-Mexico-Canada Agreement (USMCA).
The uncertainty surrounding the tariffs unsettled US financial markets, which were already volatile due to Trump’s broader trade policies. However, the administration remained firm on its decision to strengthen the Section 232 national security tariffs imposed in 2018.
Industry Reaction
The US steel industry welcomed the move, viewing it as a restoration of the 2018 tariffs, which had been weakened by exemptions and quotas. The US Customs and Border Protection agency enforced the new tariffs strictly, cutting off duty-free import qualifications well before the midnight deadline.
Philip Bell, President of the Steel Manufacturers Association, praised the decision: “By closing loopholes in the tariff that have been exploited for years, President Trump will again supercharge a steel industry that stands ready to rebuild America. The revised tariff will ensure that steelmakers in America can continue to create high-paying jobs and make greater investments, knowing they will not be undercut by unfair trade practices.”
Canada’s Trade Challenges
The tariffs come amid a leadership transition in Canada, with Prime Minister Justin Trudeau set to hand over power to his successor, Mark Carney, following his recent leadership victory. Carney has stated that he cannot engage in discussions with Trump until he is officially sworn in.
Trump has repeatedly voiced his dissatisfaction with Canada’s high dairy tariffs and recently suggested on social media that Canada should “become our cherished 51st State.” In response, Canadian Energy Minister Jonathan Wilkinson hinted at potential non-tariff countermeasures, such as restricting oil exports or levying export duties on minerals.
Despite the tensions, most US-Canada trade remains duty-free under the USMCA agreement signed in 2020. However, Trump has threatened additional tariffs if fentanyl trafficking concerns persist. Canada secured a one-month reprieve from some of Trump’s general 25% tariffs but remains vulnerable to further trade actions.
Economic Impact and Investor Concerns
Trump’s aggressive tariff policies have raised concerns among economists about potential economic downturns. Recent data indicates weakening consumer and business sentiment. A small business survey on Tuesday recorded a third consecutive month of declining confidence, erasing gains made after Trump’s re-election in November. Meanwhile, a New York Federal Reserve survey on Monday showed rising pessimism among households regarding inflation, job security, and overall financial stability.
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