The announcement of President Donald Trump to impose 25% tariffs on steel and aluminum imports is more than a new commercial policy: he points out the possible resurgence of the economic nationalism of his first mandate, this time with more force.
The new measures enter into force on Wednesday and suppose the beginning of another offensive in Trump’s commercial war. In the case of Chinese imports, tariffs on metals will be added to the existing 20%, a double blow that would have affected Mexican and Canadian products if threatened tariffs on their products had not been repealed. On Tuesday, Trump announced in Truth Social that he would double tariffs on metals in Canada at 50%.
It will not be the first time that Trump imposes tariffs on steel and aluminum, both crucial for industries such as construction and manufacturing. In 2018, during his first term, Trump imposed a 25% tariff on steel and a 10% tariff on aluminum imports.
Both then, now, the Trump administration said its objectives were to protect national steel and aluminum manufacturers in the United States for reasons of national security, as well as boost national production and create more jobs.
Some of these objectives were achieved last time: the national production of these metals increased, as well as employment in metal manufacturing industries, although briefly. But 2018 tariffs also had later negative effects on industries that require these metals as supplies.
The currently planned tariffs are even wider: this round has higher rates and includes finished metal products, as well as raw materials. While their impacts are still to be seen, we can observe what happened the first time to get clues about what to expect.
Prices rose, at first
Both aluminum and steel prices had increased in the early years of the first Trump administration, but the anticipation and subsequent imposition of tariffs on these metals caused their internal prices to rise more drastically. American steel prices increased 5% in the month after the entry into force of tariffs and aluminum increased 10%.
After just a few months, American aluminum prices began to fall, followed soon for the price of national steel. However, the gap between US and world prices for both remained greater than before tariffs. Prices also decreased more slowly than they had increased, especially for steel, which had been taxed with a higher rate of 25%. The American steel did not return to its prior price to tariffs until January 2019.
In the middle of that year, tariffs were built for Canadian and Mexican imports, which represented 27% of the United States steel imports and 43% of their aluminum imports. The Biden administration subsequently ended tariffs on the metals of the European Union in 2021, amid steel prices in historical maximums driven by the interruptions of the Covid-19 supply chain.
Do not miss: Trump announces up to 50% increase to tariffs to steel and Canadian aluminum; reiterates that your neighbor should be the state 51
Steel production was recovered, but the highest costs stopped other industries
The fall in aluminum and steel prices was due in part to the recovery of national aluminum and steel production. Compared to 2017, the United States increased its steel production by 6 million metric tons in 2019 and aluminum production in 350,000 metric tons.
“Tariffs can encourage American steel and aluminum producers to increase the capacity or restart inactive plants,” said William Hauk, professor of Economics at the University of South Carolina who specializes in international trade economy.
However, said Hauk, expanding national production capacity requires time and capital. Although the national production of steel and aluminum increased, it did not happen quick enough to lower prices. The enormous cost and limited availability of the electricity necessary to feed the foundations, particularly for aluminum, was an important obstacle. According to Hauk, this delay was one of the main reasons why Trump lifted the tariffs to Mexico and Canada in June 2019.
Meanwhile, the highest prices in general meant greater supplies costs for sectors such as manufacturing, construction and transport (main sources of demand for these metals), which contributed to reduce growth after tariffs were imposed.
This impact is not surprising, according to Hauk. “Higher supplies costs,” he said, can result in “higher prices for consumers and lower production.”
Employment creation was unequal
Metal import tariffs contributed to job creation in the metal production industry. The number of people working in steel and steel plants, as well as in aluminum production, increased from 2017 to 2019 by 6 and 5%, respectively.
However, as with metal production, these modest profits were not maintained for a long time. After tariffs against Canada and Mexico were eliminated, the remaining restrictions were not enough to boost employment in metal processing in the face of a deficit of domestic demand thanks to pandemic -related disturbances in 2020 and 2021.
The increase in internal prices of steel and aluminum also negatively affected employment in industries that depended on them as input for production, such as manufacturing. A 2019 Federal Reserve study estimated that the highest costs of inputs due to the 2018 tariffs reduced jobs in the manufacturing industry, in relation to what they would have been without tariffs, and increased the production costs of metal -based goods.
Other studies showed similar results, including one of 2020 that estimated that the increase in costs driven by tariffs could have resulted in up to 75,000 less manufacturing jobs.
With Reuters information
Follow us on Google News to always keep you informed
