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Donald Trump’s planned imposition of 25 per cent tariffs on steel and aluminium imports reprises one of his biggest trade moves during his first term as president.
In March 2018, Trump introduced tariffs of 25 per cent on steel and 10 per cent on aluminium against most countries, using national security as justification, before extending them to the EU, Canada and Mexico in June.
Trump claimed at the time they would cut the trade deficit and boost domestic manufacturing.
US imports of metals fell immediately. In total, about €6.4bn of steel and aluminium exports from the EU were hit. Brussels took three months to respond but then imposed levies on about €2.8bn worth of US imports, comprising roughly one-third steel and aluminium, one-third agricultural products and one-third other goods.
The bloc singled out iconic US products, often produced in Republican-voting states, such as bourbon whiskey, Harley-Davidson motorcycles and jeans. Annual American whiskey exports to the EU have since dropped by a third, a loss of about $256mn, according to the Distilled Spirits Council of the US.
The tariffs on imports from the EU, however, became riddled with exemptions after US manufacturers successfully argued that they needed imports of certain grades of metal and parts.
Car companies including General Motors and Ford were also forced to lower their earnings forecasts or missed analysts’ expectations in 2018 due to the tariff uncertainty as well as rising raw material costs caused by duties on steel imports to the US.
Although many US car manufacturers bought the majority of their steel locally, they were still hit as domestic steel producers took the opportunity to push up their own prices. Producers also increased their own output comparatively little after the imposition of the tariffs.
Trump later granted several trading partners, including Canada and Mexico, duty-free exemptions.
After Trump left office, the US, EU, Japan and the UK agreed a temporary truce when then-president Joe Biden partly removed the tariffs, agreeing quotas above which duties on metals are applied. The EU froze all of its measures.
The truce is due to lapse on the EU side at the end of March, while the US quotas that replaced the tariffs will expire at the end of the year.
The looming tariffs, however, have already unsettled investors in those industries most exposed.
Shares in some European steelmakers fell on Monday morning after Trump’s announcement. ArcelorMittal, which generates about 13 per cent of its sales in the US, is heavily exposed. The company sells high value-added steel products in the US, notably from its Canadian operations, a key supplier to the US automotive sector. It also supplies semi-finished steel products from Mexico to its facilities in the US.
The company’s chief financial officer insisted last week, however, that any impact would be manageable based on what happened in 2018 when higher prices offset higher costs.
The car industry is again likely to be hit — with the possibility that exemptions may once more cushion the blow. This time the tariff threat comes as manufacturers are already grappling with the shift to electric vehicles and tougher emissions standards, making it harder for them to absorb higher raw material costs.
Volvo Cars has already warned of lower profitability this year, citing the uncertainty surrounding Trump’s tariffs. “There’s going to be tariffs . . . you’re going to see some geopolitics and some change in policy so that’s going to create general turbulence,” Jim Rowan, chief executive of the Swedish group, said last week.
https://www.ft.com/content/c41c54d0-f2b1-4450-9b94-b6a3db8e6cc9
