President Trump officially increased tariffs on all steel and aluminum imports to 25% on Wednesday, promising they would help create U.S. factory jobs at a time when his seesawing tariff threats are jolting the stock market and raising fears of an economic slowdown, increased inflation and even a global trade war.
The European Union quickly announced it would retaliate with steps that will take effect April 1.
“As the U.S. are applying tariffs worth 28 billion dollars, we are responding with countermeasures worth 26 billion euros ($28 billion),” European Commission President Ursula von der Leyen said in a statement. “We will always remain open to negotiation. We firmly believe that in a world fraught with geopolitical and economic uncertainties, it is not in our common interest to burden our economies with tariffs.”
British Business and Trade Secretary Jonathan Reynolds said “all options were on the table” to respond “in the national interest,” according to the Reuters news agency.
It reported that Australian Prime Minister Anthony Albanese called the Trump move “entirely unjustified … and against the spirit of our two nations’ enduring friendship,” but he ruled out tit-for-tat duties.
“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 told reporters.
Mr. Trump removed all exemptions from his 2018 tariffs on the metals, in addition to increasing the tariffs on aluminum from 10%.
His moves, based off a February directive, are part of a broader effort to disrupt and transform global commerce.
The president has separate tariffs on Canada, Mexico and China, with plans to also tax imports from the European Union, Brazil and South Korea by charging “reciprocal” rates starting on April 2.
Mr. Trump told CEOs in the Business Roundtable Tuesday that the tariffs were causing companies to invest in U.S. factories. The 8% drop in the S&P 500 stock index over the past month on fears of deteriorating growth appears unlikely to dissuade him, as Mr. Trump argued that higher tariff rates would be more effective at bringing back factories.
“The higher it goes, the more likely it is they’re going to build,” Mr. Trump told the group. “The biggest win is if they move into our country and produce jobs. That’s a bigger win than the tariffs themselves, but the tariffs are going to be throwing off a lot of money to this country.”
Mr. Trump on Tuesday threatened to put tariffs of 50% on steel and aluminum from Canada, but he chose to stay with the 25% rate after the province of Ontario suspended plans to put a surcharge on electricity sold to Michigan, Minnesota and New York.
Trump tariffs history
In many ways, the president is now addressing what he perceives as unfinished business from his first term. Mr. Trump meaningfully increased tariffs, but the revenues collected by the federal government were too small to significantly increase overall inflationary pressures.
Mr. Trump’s 2018 tariffs on steel and aluminum were eroded by exemptions.
After Canada and Mexico agreed to his demand for a revamped North American trade deal in 2020, they avoided the import taxes on the metals. Other U.S. trading partners had import quotas supplant the tariffs. And the first Trump administration also allowed U.S. companies to request exemptions from the tariffs if, for instance, they couldn’t find the steel they needed from domestic producers.
While Mr. Trump’s tariffs could help steel and aluminum plants in the United States, they could raise prices for the manufacturers that use the metals as raw materials.
Moreover, economists have found, the gains to the steel and aluminum industries were more than offset by the cost they imposed on “downstream” manufacturers that use their products.
At these downstream companies, production fell by nearly $3.5 billion because of the tariffs in 2021, a loss that exceeded the $2.3 billion uptick in production that year by aluminum producers and steelmakers, the U.S. International Trade Commission found in 2023.
Mr. Trump sees the tariffs as leading to more domestic factories, and the White House has noted that Volvo, Volkswagen and Honda are all exploring an increase in their U.S. footprint. But the prospect of higher prices, fewer sales and lower profits might cause some companies to refrain from investing in new facilities.
“If you’re an executive in the boardroom, are you really going to tell your board it’s the time to expand that assembly line?” remarked John Murphy, senior vice president at the U.S. Chamber of Commerce.
Lutnick defends Trump economic policies
In an interview with CBS News Tuesday, Commerce Secretary Howard Lutnick said the president’s economic policies are “worth it,” even if they lead to a recession.
In a recent interview with Fox News, Mr. Trump declined to rule out that his policies, including increasing tariffs, could cause a recession.
But Lutnick denied that there’s any chaos in the way the president has been using tariffs to pressure U.S. trading partners.
“It is not chaotic, and the only one who thinks it’s chaotic is someone who’s being silly,” Lutnick said.
