The White House’s new tariffs on steel and aluminum, announced Monday, could have wide-ranging impacts across the economy, shielding some companies from foreign competition while driving up costs in other areas.
The 25% tariff would apply to all steel and aluminum shipments, including those from Canada and Mexico, which last week were granted 30-day delays on a blanket 25% tariff affecting all goods. Although Canada will feel the brunt of Monday’s order as the No. 1 foreign supplier to U.S. buyers, the tariffs also target China, which accounts for more than half of global steel output.
Here are some winners and losers from the Trump administration’s latest trade move.
Winners:
U.S. steel and aluminum suppliers
Tariffs serve as a tax on imports, leading foreign suppliers to raise prices. That means U.S. companies that supply steel and aluminum will have a chance to undercut their foreign competitors as steel from trade partners such as Canada, Brazil and Mexico becomes dramatically more expensive.
Several U.S.-based steel companies saw their stock prices jump Monday as a result: Nucor and Steel Dynamics rose by 5.5% and 4.9%, respectively, by market close, while Cleveland-Cliffs soared nearly 18%. The United States Steel Corp., better known as U.S. Steel, climbed nearly 5%. Aluminum producer Alcoa rose about 2%.
Philip Bell, president of the Steel Manufacturers Association, said the tariffs would help “level the playing field” for domestic producers and pushed back on criticism that tariffs would increase costs without adding large numbers of manufacturing jobs.
“When you have a tariff that’s applied broadly across all product segments, sure, there’s going to be a short-term impact,” he said. “But when you have product-specific tariffs, like the ones on steel and aluminum, it really remains to be seen what the long-term impact of that is on jobs and consumer prices.”
A 25% tariff on the amount of steel used in a typical $40,000 car would raise the price 1 or 2%, Bell claimed. And he argued that every steel job creates other jobs for contractors, construction workers, engineering firms and “even the food truck that’s outside the steel mill where you can go grab breakfast or lunch.”
The president of United Steelworkers International, however, made a distinction between “trusted trade partners, like Canada, and those who are seeking to undercut our industries as they work to dominate the global market.”
“Our union welcomes President Donald Trump’s efforts to contain the global overcapacity that has for too long enabled bad actors like China to flood the global market with its unfairly traded products, resulting in surging imports into the United States, especially from Mexico,” President David McCall said in a statement. But he added that “Canada is not the problem.”
Losers:
Consumers
Aluminum and steel are used in a wide range of products, meaning higher import duties would ultimately filter through to consumers. The metals can be found in appliances, smartphones, baseball bats, pots and pans, telescopes, and outdoor furniture. Even soda cans could be affected, Bank of America retail analysts wrote in a report earlier this month.
However, it’s unclear how long it will take for consumers to feel the impact and to what extent. That’s in part because it depends on how much steel or aluminum is used to make the product, said Lydia Cox, an economics professor at the University of Wisconsin at Madison.
It’s also on the businesses to decide what added costs they should pass along to their customers, she said: “If you had a 25% increase on 50% of your costs, that’ll be a pretty sizable [potential] increase” in prices.
Instead, it’s businesses and manufacturers - which buy steel and aluminum in bulk - that will be the first to see price increases, said Douglas Irwin, an economics professor at Dartmouth College.
“It’s not like you or I, as a member of a household, go down to Lowe’s or Home Depot or something and buy a bar of steel,” he said.
U.S. manufacturers
A 2018 analysis of the steel tariffs during the first Trump administration, published by the nonpartisan Peterson Institute for International Economics, found the policy created jobs but at great cost to the myriad U.S. buyers of foreign steel.
The analysis concluded that the policy, which also taxed imported steel at 25%, created about 8,700 jobs and generated some $2.4 billion in pretax profits for steel firms. But domestic industries buying steel in the United States paid another $5.6 billion thanks to the protection - a cost of about $650,000 for each job created in the steel industry.
Gary Hufbauer, a senior researcher at the Peterson Institute and one of the study’s authors, said he doesn’t expect many new jobs to be created by the new tariffs, because they would mostly have the effect of replacing the existing quotas that other countries use to limit exports to the United States. But escalating trade wars through tariffs in this way will “ensure retaliation against select U.S. products and firms,” Hufbauer added.
“All in all, downstream U.S. industries will suffer and ensure a net loss in U.S. manufacturing jobs, as occurred in Trump 1.0,” said Hufbauer.
This time around, companies such as John Deere, Caterpillar and Boeing could also be hurt because their products use a lot of aluminum or steel, as could private developers and state and local governments trying to repair infrastructure, Irwin said.
Glenn Stevens Jr., executive director of MichAuto, a division of the Detroit Regional Chamber, said automakers probably can’t absorb the combined effect of tariffs on Canada and Mexico and global steel and aluminum supplies.
“Vehicle transaction prices are already very high, and if they go higher, that dampens demand,” he said. That, in turn, could lead to production cuts and job losses.
U.S. exporters
Some U.S. industries that sell products abroad also could feel the blowback of Trump’s latest round of import duties as other nations retaliate, Irwin said. He cited farm exports as one example because foreign countries can easily find alternate sources of soybeans, wheat and other agricultural products abroad.
That happened during Trump’s first term in office.
“The Trump administration started to bail out American farmers and agriculture,” said Michael Klein, an economics professor at Tufts University and executive editor of EconoFact, a nonpartisan publication about economic and social policies published by the university. “Any revenues that were raised were depleted by trying to cushion those who were hurt by retaliation.”