President Trump Set to Sign Order Imposing 25% Tariffs On Steel and Aluminum

What Happened?

The Trump Administration has been issuing statements for several days saying President Trump is set to sign an order imposing 25% tariffs on steel and aluminum. 

If ordered, the new tariffs would impact several countries, most notably Canada and Mexico. 

As statements by President Trump himself promised the tariffs were coming Monday, U.S. Steel’s stock rose considerably. 

As of early Monday evening Mr. Trump had still not signed the order, leaving open the possibility the threat of new tariffs could simply be another negotiating tactic. 

Why it Matters

The idea behind the tariffs is to protect American consumers from unfair competition from steel and aluminum imported into the United States. But tariffs can sometimes cause consumer prices to increase because producers simply pass those costs on to buyers.

According to the Keith Bradsher of the Associated Press, the top five steel exporters to the United States are Canada, Brazil, Mexico, South Korea and Germany. These are the countries that would be most impacted by a new round of tariffs on steel.

‘If you put a tax on imported steel and aluminum, you will raise the price of everything that uses that — cars first and foremost,’ said Dean Baker, a senior economist at The Center For Economic and Policy Research.  

Mr. Baker estimated the tariffs could increase the cost of cars sold in the U.S. by $1000 to $1500 dollars due to the amount of steel used in each automobile. Wall Street analysts also worried a new round of tariffs could increase inflation at a time when consumers are already struggling with the cost of living.

As a tool of diplomacy, the previous tariffs enacted and then put on pause by the Trump Administration did seem to generate some results in terms of changing the behaviors of countries targeted by the price increases. 

But in addition to higher consumer costs, tariffs risk igniting a trade war, which would also impose additional costs on American exports. To that end President Trump promised to retaliate immediately against any tariffs imposed on U.S. goods in response to his tariffs on foreign goods.

Regarding the impact on the steel industry itself, according to Capital Economics “During Mr. Trump's first term, steel producers increased their output after tariffs were imposed, while domestic demand fell.” That contributed to a decline in steel prices about a year after the tariffs were imposed during Mr. Trump’s first term as President. 

How it Affects You

While tariffs and the threat of tariffs can be an effective tool in diplomacy, they run the risk of starting trade wars, which in the past have sometimes led to actual wars. 

With the majority in Congress mostly deferring to the White House, how far to press new tariffs will likely be decided by President Trump alone.