Even then, US President Donald Trump announced plans to localize the steel industry almost overnight. He will increase import tariffs on steel and aluminum to 50%. This unexpected decision was announced while Trump was at a rally in Pennsylvania on Friday. On Wednesday, the new tariffs come into effect. This move is further escalating the tit-for-tat global trade war between the United States and China.
Trump’s announcement came on the heels of accusations against China for violating a newly agreed tariffs truce. He argued that the country had “completely broken its promise to us,” stoking a fresh round of discord in America’s international trade relations. This move goes beyond the steel industry alone. Analysts fear it might increase leverage in negotiations with America’s global trading partners.
In response to Trump’s accusations, a spokesperson from China’s Ministry of Commerce rejected the claims, asserting that China had honored the agreement by canceling or suspending relevant tariff and non-tariff measures aimed at the US “reciprocal tariffs.” This statement encapsulates the confusing realities of the bilateral trade relationship and the oppositional narratives that are developing in each government’s favor.
The US Dollar Index is a measure of the dollar’s value against a weighted basket of six major foreign currencies. After hitting a six-week low of 98.58 earlier this week, the dollar has begun to recover. Underneath the surface, market sentiment is showing some serious cracks, especially following China’s Ministry of Commerce yesterday rejecting Trump’s assertions on the tariffs truce. Investors are growing concerned as the droplets increase and spread, including potentially severe effects to global comptroller financial markets.
US ISM Manufacturing PMI fell to 48.5 in May, down from 48.7 in April. This disappointing decline only further increases the economic uncertainty and misses the expected 49.5 by a long shot. This marks the third month in a row with decreasing output, ringing alarm bells across the country about the state of the manufacturing sector. This drop in the PMI highlights wider issues about economic growth and stability in the face of trade wars that never seem to end.
The European Commission (EC) laid down the law in chastising the dominant European automotive sector. They said Trump’s surprise announcement of higher tariffs undercuts months of work to pursue a mutually beneficial trade agreement. The EC followed up with an equally vigorous threat of its own—notice of impending “countermeasures.” In doing so, they warned that further retaliatory actions could follow if escalation continues. This declaration underscores the fragile state of trade relations across the world as countries try to adapt to a complex global economic paradigm.
No doubt Trump’s recently announced 25% tariffs are designed to pressure global steel producers to bow to his will. This change further intensifies the trade war that is already underway. Industry insiders think this ban could provide immediate assistance to the US steel producers. On the other hand, it may set off lasting damage, including retaliatory tariffs from our trading partners and structural changes to global supply chains.