President Trump’s bold move to enforce tariffs on foreign steel and aluminum officially kicked off on Wednesday, quickly garnering a strong response from the European Union and adding fuel to already tense relations with other trading nations affected by his unpredictable stance on hefty trade sanctions.
Trump’s imposition of a 25% tariff impacts metal imports from every country supplying steel and aluminum to the U.S. While many domestic steel and aluminum producers welcome the measure, seeing it as a shield against foreign competition, it’s anticipated to push up costs for American industries reliant on these materials, such as car manufacturers, canned goods producers, and solar panel makers.
In response, certain trade partners have vowed to hit back with levies aimed at harming U.S. exporters. Canada, a key metal supplier to the U.S., announced retaliatory tariffs on $20 billion worth of American imports, affecting metals, electronics, and sports goods. Meanwhile, the European Union wasted no time in declaring tariffs on $28 billion worth of American products, targeting goods like bourbon, motorcycles, and boats.
These brewing tensions risk evolving into larger trade conflicts. When asked on Wednesday about potential retaliation against EU tariffs, Trump replied, “Of course I will respond.”
Some governments, including Japan, Australia, Mexico, Brazil, and the UK, are opting to remain patient for now, hoping to avoid further strain on diplomatic ties and their economies. They are, however, bracing for the next wave of Trump’s tariffs slated for April 2, which are expected to target foreign cars and nations perceived to be discriminating against the U.S.
Recent trade policy shifts under Trump have jolted stock markets and stirred economic unease. On Wednesday, markets swung between gains and losses as investors balanced worries over tariffs with positive February inflation data. Analysts caution that Trump’s comprehensive tariff agenda could ultimately drive inflation higher and hinder economic growth.
Goldman Sachs recently revised its 2025 U.S. growth forecast down to 1.7% from 2.4%, citing trade policy issues.
“This might be the calm CPI report before the storm,” said Seema Shah, Principal Asset Management’s chief global strategist. She expressed concerns that ongoing tariff policies could worsen the inflation situation over time.
The metal tariffs mark another effort by Trump to use America’s market power against other nations. Recently, he levied similar sanctions on imports from Canada, Mexico, and China, blaming these countries for cross-border drug trafficking and migration, before retracting some of those tariffs.
Trump’s tactics have placed many U.S. allies in a defensive position, trying to pacify him while also safeguarding their own industries. On Tuesday, Trump threatened to double tariffs on Canadian metals following Ontario’s introduction of a surcharge on electricity exported to the U.S. However, Ontario quickly retracted the levy, prompting Trump to revoke his threats.
These steel and aluminum tariffs echo similar measures from 2018, reigniting trade tiffs. Trump argues these tariffs are vital for national security, ensuring a dependable metal source for military needs.
Ironically, the major impact of these tariffs falls on U.S. allies. Canada stands as the top steel and aluminum supplier to the U.S., with Brazil, Mexico, South Korea, and Vietnam also playing significant roles. The UAE and China supply aluminum.
Since the initial tariffs in 2018, both Trump and former President Biden have negotiated with countries like Brazil, Mexico, Canada, and the EU, resulting in tariff reductions that have frustrated the U.S. metals industry, which argues the relief measures have weakened domestic steel and aluminum sectors.
U.S. Steel, one of the few remaining primary steel producers, warns it may have to close plants and lay off workers unless it finds a financial partner. Cleveland Cliffs, another key steelmaker, described last year as the toughest year for domestic demand in over a decade.
“Things would be much worse for the industry without those tariffs,” said Kevin Dempsey, president of the American Iron and Steel Institute.
Yet, since steel and aluminum are fundamental in producing numerous goods, higher metal prices pose challenges not just to manufacturers but also to the broader U.S. economy.
By driving up input costs, tariffs could harm factories employing more workers than those in steel and aluminum production, potentially undermining Trump’s broader goals to boost U.S. manufacturing.
An analysis from the U.S. International Trade Commission indicates the broader economic costs of Trump’s early-term metal tariffs outweighed the benefits. Although the tariffs encouraged purchasing from U.S. sources and increased domestic price points, they inadvertently raised production costs for sectors like automotive and machinery, causing a $3.48 billion contraction in those areas by 2021. Meanwhile, the steel and aluminum sectors produced $2.25 billion more due to the tariffs.
To ease negative impacts on other metal-using industries, the Trump administration has broadened tariffs to cover downstream products like tractor parts, metal furniture, and hinges, which Chad Bown of the Peterson Institute for International Economics sees as an “implicit acknowledgment” of industry challenges prompted by earlier tariffs.
Bown warns of a “cycle of cascading protectionism,” where more industries seek government protections, a trend that “may be difficult to stop.”
“Where does it end?” Bown asks.
The threat of higher costs has spurred industries like automakers to lobby for tariffs against foreign competitors. Trump plans to impose a tariff on foreign cars on April 2.
For automakers, metal tariffs threaten to push up costs when vehicle prices are already near record highs. As of January, the average new vehicle price topped $48,000, according to market analyst Edmunds.
“Affordability is already a major concern for American car shoppers amid elevated prices and interest rates,” remarks Jessica Caldwell, Edmunds’ head of insights.
Robert Budway, of the Can Manufacturers Institute, notes tariffs lead to increased costs in packaging for goods such as food and beverages, costs that end up being transferred to consumers.
Since Trump’s first steel tariffs, food packagers have had no option but to use more costly imported metals, says Budway, pointing out the net outcome is just higher prices.
Major exports like agriculture could feel the pinch of retaliatory tariffs targeting U.S. industries, including poultry, beef, pork, and soybeans.
Canadian authorities affirmed on Wednesday that their retaliation would complement a 25% tariff imposed on $30 billion of American products earlier in response to Trump’s tariffs.
Canada’s finance ministry representative, Gabriel Brunet, assured, “Canada is ready to respond firmly and proportionately” to any U.S. tariffs.
The UK trade secretary, Jonathan Reynolds, described the tariffs as “disappointing,” indicating the UK was exploring both protective measures for local producers and negotiations with the U.S. to resolve the issue.
Australia, noted Prime Minister Anthony Albanese, will refrain from retaliatory tariffs, prioritizing shielding Australian consumers from price increases. President Claudia Sheinbaum of Mexico indicated a wait-and-see approach until Trump’s next tariff round on April 2 to decide on any retaliation.
Brazil, the second-largest steel importer to the U.S. after Canada, similarly plans no immediate reaction. Brazil’s economy minister, Fernando Haddad, relayed President Lula’s message to “remain calm now,” recalling that “we’ve negotiated under worse conditions than this.”
The European Union announced on Wednesday a two-phase response to the tariffs. Starting April 1, a previously suspended set of tariffs will take effect, impacting products from boats to bourbon, while officials finalize a list of other goods, including farm and industrial items, that will face higher tariffs.
The EU aims to match the impact on the American economy as felt by Europe, aiming to prompt U.S. negotiations.
However, Maros Sefcovic, EU’s trade commissioner, stated Monday that the U.S. has shown little engagement in reaching a deal. “In the end, as it is said, one hand cannot clap,” he commented.
U.S. officials have suggested that at least for these metal tariffs, resolving via negotiation seems unlikely. Commerce Secretary Howard Lutnick emphasized that Trump deems metals crucial to national security. “The president wants steel and aluminum in America. And let me be clear, nothing’s going to stop that until we’ve got a big, strong domestic steel and aluminum capability,” he affirmed.
Reporting was contributed by Neal E. Boudette, Danielle Kaye, Ian Austen, Jack Nicas, and Paulina Villegas.
