The Trump administration just doubled the tariffs on steel and aluminum imports. Here's what that means

Yahoo

2 days ago

US tariffs on steel and aluminum doubled to 50% as of 12:01 am ET on Wednesday, a move cheered by the beleaguered American steel industry but worrisome to sectors that heavily use the metals, from car makers to can manufacturers.
The jump in import taxes is the latest salvo in President Donald Trump's trade war, part of a broad range of tariffs he's levied since February. But the steel tariffs are especially significant to him and his political base, a symbol of once-iconic US manufacturing that has since fallen on hard times.
The leap in tariffs likely won't hit American pocketbooks immediately – but experts say that higher prices on construction projects, car lots, appliances and elsewhere are all but inevitable from the higher duties. And while the tariffs could protect steel manufacturing jobs, they could hurt employment in much larger industries.
But the administration said the tariffs are crucial to national security and the economy.
'Domestic steel and aluminum production is imperative for our defense-industrial base,' White House spokesman Kush Desai said in a statement to CNN. 'The Trump administration is committed to reshoring manufacturing that's critical for our national and economic security while unleashing a full suite of supply-side reforms – including rapid deregulation, tax cuts, and unleashing American energy – to continue delivering economic relief for the American people.'
The American Iron and Steel Institute, an industry trade group, said that protecting the steel industry is crucial.
'We still consume more steel than we produce in America,' said Lourenco Goncalves, CEO of Cleveland Cliffs, one of the major US steelmakers, and the chairman of AISI.
He said that raising the tariffs to 50% will only increase the cost of building a car by $300, which he characterized as minor in terms of the overall cost of a car.
'The average cost of a car is $48,000, with an added $300, it's $48,300. That's not going to be the decision-making factor for a person to buy or not buy a car,' he said at a press conference Tuesday.
But the Aluminum Association, the trade group for that industry, said it worried that the broad universal tariff could hurt it more than it helps as it cuts off the supply of raw aluminum from Canada many finishing mills in the United States depend upon. Those mills account for most of the jobs in the US aluminum industry.
Industries that use steel and aluminum also expressed concern. Can manufacturers warned that price hikes could even reach grocery store shelves.
The Can Manufacturers Institute, a trade group for the industry, said domestic can makers import almost 80% of tin mill steel due to the cut in domestic production of that type of steel. It said the increase in tariffs will 'further increase the cost of canned goods,' such as food and drinks.
But it is not clear when or if that increase of a few cents per can will be passed onto consumers.
Experts also warn there are more jobs at risk at manufacturers that use steel and aluminum than would be protected by the tariffs.
'I think that's a really quintessentially damaging policy, there are (at least) 50 times more workers…in industries that use steel, like cars, than there are in the steel industry,' Larry Summers, director of the National Economic Council during the Obama administration, told CNN Monday. 'And so the net effect of this is going to be to destroy manufacturing jobs. The net effect of this is going to be to push up consumer prices.'
Trump announced a 25% tariff on steel imports in February, part of a broader effort by the White House to revive America's Rust Belt and boost manufacturing jobs.
He announced the doubling of the tariffs on Friday during a trip to a US Steel mill outside of Pittsburgh.
'If you don't have steel, you don't have a country,' he told a crowd filled with cheering steelworkers. 'You can't make a military. What are we going to do? Say, 'Let's go to China to get our steel for the army tanks and for the boats and ships.' A strong steel industry is not just a matter of dignity or prosperity and pride. It's above all, a matter of national security.'
Spot steel prices have increased 20% or more, depending on the product, since the original 25% tariffs went into effect in March, said Philip Gibbs, steel analyst for KeyBank. He said that aluminum prices have also increased, but not by as much. Overall steel prices increased 6% just between March and April, according to the government's Producer Price Index, while aluminum prices increased 2%.
'They're not bashful about asking for price increases,' Gibbs said. 'If they feel like if they have a window to ask, they will.'
The two industries have been benefiting from the previous 25% tariffs. But they've had other protections.
Trump in 2018, during his previous administration, also announced 25% tariffs on steel and 10% tariffs on aluminum, although the following year he lifted them on Mexico and Canada.
While the US is not the manufacturing-focused economy it once was, it still consumes tens of millions of tons of steel and aluminum a year. Studies of those 2018 tariffs found that for every steel job that was saved, there were 75 jobs lost elsewhere in manufacturing due to higher input costs. (The American Iron and Steel Institute challenges those studies.)
Automakers mostly source their steel used at North American plants from domestic mills, and they have long-term purchase contracts that have, so far, protected them from price increases in the spot market. But the previous round of tariffs in 2018 and the price increases that followed eventually cost the companies billions of dollars, the automakers reported at that time.
It also did little to increase steel production then, and it's not clear it will this time. For example, American producers have largely exited the market for the tin mill steel used for cans. That includes Cleveland Cliffs, but Goncalves said the company is not considering restarting that production even with the 50% tariffs. He also wouldn't comment on his company's pricing plans.
And the tariffs could actually hurt some manufacturers they we designed to protect. The earlier 25% tariff on all imported aluminum could cost 100,000 American jobs, William Oplinger, the CEO of Alcoa, one of the largest US aluminum makers, warned in February. Asked if it had any new estimates given the doubling of the tariffs, Alcoa told CNN in a statement that it is 'evaluating the announcement.'
Some of those jobs could be because of lost business. Coca-Cola CEO James Quincey said in February the company is preparing to package more of its products in plastic and glass as opposed to aluminum to avoid the higher input costs, and that was considering only the 25% tariff rate.
But US aluminum mills in the United States get much of the aluminum they process from Canada, where the cost of energy needed to make the raw material is cheaper. The Aluminum Association is seeking a carve out for Canadian imports.
'We urge the administration to take a tailored approach that reserves high tariffs for bad actors—such as China—that flood the market and includes carve outs for proven partners—such as Canada,' said the trade group's statement. 'Doing so will ensure the US economy has the access to the aluminum it needs to grow, while we work with the administration to increase domestic production.'
– CNN's Elisabeth Buchwald contributed to this report.