Photo credit: www.cbsnews.com
On Wednesday, President Trump implemented an increase in tariffs on all steel and aluminum imports to 25%. This move is expected to bolster U.S. manufacturing jobs, despite concerns that ongoing tariff threats may destabilize the stock market, provoke inflation, and potentially ignite a global trade conflict.
In response, the European Union swiftly announced that it would introduce countermeasures starting April 1. European Commission President Ursula von der Leyen highlighted the EU’s commitment to negotiate, stressing the shared interest in avoiding tariff-based economic strains amid geopolitical uncertainties. She stated, “As the U.S. applies tariffs amounting to 28 billion dollars, we are responding with countermeasures valued at 26 billion euros ($28 billion).” This indicates a strong EU resolve to safeguard its economic interests.
Further emphasizing the EU’s stance, France’s European Affairs Minister Benjamin Haddad noted that the EU might escalate its measures. He echoed the sentiment that a trade war would be detrimental for all parties involved, according to reports from Reuters.
British Business and Trade Secretary Jonathan Reynolds remarked that “all options were on the table” regarding potential responses to protect national interests, reflecting a broader apprehension within the UK about the implications of Trump’s tariff strategy.
Australian Prime Minister Anthony Albanese described Trump’s decision as “entirely unjustified” and contrary to the spirit of longstanding bilateral relations. He opted against retaliatory tariffs but warned that escalating trade tensions could harm economic growth and lead to increased consumer prices. Albanese emphasized, “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.”
With this latest move, Trump has removed all prior exemptions from the 2018 metal tariffs and raised aluminum tariffs from 10%. These actions are part of a wider strategy aimed at reshaping global trade dynamics.
The U.S. also maintains separate tariffs on Canada, Mexico, and China, with plans to impose “reciprocal” tariffs on imports from the European Union, Brazil, and South Korea beginning April 2. In a meeting with CEOs at the Business Roundtable, Trump defended the tariffs, suggesting they are encouraging companies to invest in U.S. manufacturing. Despite the 8% decline in the S&P 500 index over the past month due to concerns over economic growth, Trump remains committed to the belief that increasing tariffs will incentivize domestic production. “The higher it goes, the more likely it is they’re going to build,” he asserted, framing the expansion of factories and job creation as paramount achievements, with tariffs merely serving as a financial advantage for the nation.
On Tuesday, Trump hinted at imposing a 50% tariff on steel and aluminum from Canada but ultimately decided on maintaining the 25% rate after Ontario suspended planned electricity surcharges impacting the U.S.
History of Trump’s Tariffs
The tariffs reflect Trump’s intention to address what he views as unresolved issues from his initial term. Although tariffs were significantly raised in 2018, revenues generated did not substantially affect overall inflation rates. Many of these tariffs were less effective due to exemptions granted to various trading partners.
Post the renegotiation of the North American Free Trade Agreement in 2020, Canada and Mexico managed to evade the metal import tariffs. Instead, other U.S. allies received import quotas in lieu of tariffs, while domestic enterprises could request exemptions based on their specific needs.
While the tariffs may bolster steel and aluminum producers within the U.S., they could simultaneously inflate costs for manufacturers reliant on these metals. Economic analysis indicates that the advantages gained by the steel and aluminum sectors may be eclipsed by the challenges faced by “downstream” industries relying on these materials, with production losses reported to be nearly $3.5 billion in 2021—significantly higher than the $2.3 billion growth observed among aluminum and steel producers, according to the U.S. International Trade Commission.
Trump envisions that these tariffs will lead to a resurgence of domestic manufacturing. The White House has cited interest from companies like Volvo, Volkswagen, and Honda in expanding U.S. operations. However, higher costs and the risk of reduced sales and profits may deter some businesses from making new investments. John Murphy, a senior vice president at the U.S. Chamber of Commerce, questioned whether executives would advocate for expansion amidst such volatility.
Lutnick’s Defense of Tariff Policies
In a recent CBS News interview, Commerce Secretary Howard Lutnick defended the administration’s economic strategies, claiming they are “worth it,” even if they may trigger a recession. Trump himself has not dismissed the possibility that his tariff policies could lead the economy into a downturn.
However, Lutnick rejected characterizations of chaotic management regarding the tariff situation, asserting, “It is not chaotic, and the only one who thinks it’s chaotic is someone who’s being silly.”
Source
www.cbsnews.com