On Wednesday, Donald Trump doubled down on his trade war, announcing a huge escalation in tariffs on imported steel. He unilaterally increased their tariff rate from 25% to 50%. While we recognize the rationale behind this surprise move, it will cause irrevocable harm to the steel supply chain. Europe, especially, has yet to receive a permanent exemption from these tariffs. At the end of May, the U.K. government announced their proposed U.K.-U.S. trade deal. Now, it finds itself squeezed between rising costs and stiffer competition thanks to the new tariffs.
The European steel industry is still recovering from the impacts of the first 25% duty originally set in place back in March. Now, it is being dealt another body blow with the most recent hike. This previous action affected about 3.89 million metric tons of EU-produced steel exported to the U.S. in 2024. Steel industry experts have been clear that if Trump doubles the tariffs there will be a massive dumping of steel into other markets, particularly Europe. This change would escalate an already price-strained layer of pressure.
Gareth Stace, director general of industry association UK Steel, went on to explain how these tariffs have hurt UK domestic steel manufacturers. He focused on the big picture concern, which is that the tariffs have forged an unpredictable climate. Local producers have a hard time staying profitable as their costs increase and market demand slips.
Josh Spoores, head of steel Americas analysis at CRU, said he expects the new tariffs to increase prices within Europe. He explained this wisdom during a press briefing last week. He remarked, “This was an absolute surprise. Already steel prices in the U.S. are higher than anywhere else, and it is a net importer which needs to have volumes coming in. All this does is raise prices there.”
The European Union responded to Trump’s announcement, expressing concern that these tariffs “add further uncertainty to the global economy and increases costs for consumers and businesses on both sides of the Atlantic.” Faced with plummeting steel demand all over Europe, the industry has begun to feel the heat. Producers can no longer compete with cheap foreign products from countries whose cost of production is a fraction of ours. Kaye Ayub noted, “Steel demand is already low across Europe, eroding prices and domestic steelmaker’s profit margins. This has forced many producers to cut production and close plants.”
With demand bottoming out and making it unprofitable, even steel manufacturers are in for some extreme pain. Spoores indicated that the increased tariffs could “likely exacerbate steel oversupply in Europe, applying increased downward pressure to selling prices.” He acknowledged that European manufacturers might look to produce more steel intensive products in Europe that would be exported to the U.S. He warned that this approach may not be feasible for all.
Aside from hurting European markets, Trump’s new tariff increase would lead to further inflationary pressure in the U.S. In the short term, Rella Suskin, an equity analyst at Morningstar, said that firms like BMW have begun issuing earnings guidance for losses. These warnings are a result of the tariffs on steel and aluminum. She added that this could total to “a big three-digit million figure,” making the automotive space even more complicated.
Canada and Mexico are the largest sources of steel imports into the United States. Brazil, South Korea and Germany are major forces in the market. It would thus seem to be somewhat paradoxical that U.S. steelmakers need imports. If they experience increased output prices, they are able to more than double their profits.
The possible consequences go deeper than steel producers alone. Danish wind energy developer Orsted’s reliance on international supply chains to source components like offshore wind turbine towers is a wake-up call. This reliance can have serious consequences for the corporation. Without a strong domestic local supply chain, the company may be put at competitive disadvantages with higher costs and delays on projects.