In a surprising move that further increases already high trade tensions, Trump announced Monday he is doubling the import tariff rate on steel and aluminum. Starting Wednesday, the new rate will jump from 25% to 50%. This decision is a reversal after months of tariff changes. The other changes are intended to strengthen the American steel industry and lessen our dependence on foreign production, particularly from China. Indeed, Trump’s announcement has elicited a rare unified criticism from the European Commission, which said it was “deeply sorry” to see the move.
In April, Trump threatened to slap a 20% tariff Trump on all goods coming from the EU. This action was the first step of the tariff imposition process. This was subsequently decreased down to 10% to try to help persuade the US and EU to agree on trade balances. Trump was understandably frustrated with the rapid pace of negotiations. He threatened that he would raise tariffs even further if talks were not moving at an acceptable pace.
The Commission reiterated that this decision injects new unpredictability into the global economic order. Just like the other contradictions above, it raises costs for consumers and businesses on both sides of the Atlantic. On the steel side, about 25% of the steel we consume in the US comes from imports. This suggests that the tariffs would have a large direct impact on domestic steel prices.
“We strongly regret the announced increase of US tariffs on steel imports from 25% to 50%,” – European Commission
Trump’s protectionist move paid political dividends just days later, as he defended the tariff increase in a rally in Pittsburgh—a city synonymous with steel production. He justified the relocation by saying it would strengthen local manufacturing and prevent national supply chain disruptions.
The former president highlighted an investment of $14 billion (£10 billion) in the region’s steel production through a partnership between US Steel and Japan’s Nippon Steel.
“There will be no layoffs and no outsourcing whatsoever, and every US steelworker will soon receive a well-deserved $5,000 bonus,” – Donald Trump
The contentious debate over these tariffs has taken place against the striking decline of US steel production. Meanwhile, other countries like China, India, and Japan have taken the lead as the biggest producers. This transition could have profound implications for America’s competitive standing in the global marketplace.
In reaction to these developments, rather than proceeding with imposing tariffs, Trump took the EU negotiation deadline on tariffs and extended it. Yet he extended it by over a month. Following a “very nice” call with Ursula von der Leyen, the chief of the European Commission, he pushed back the deadline to July 9. Both proponents and opponents considered this extension to be a wonderful opportunity to compromise. They needed to get a deal done before another round of tariff hikes went into effect.
The recent developments prompted questions about the UK’s zero-tariff trade deal with the United States on steel and aluminum. The UK has now left the EU following the 2016 Brexit referendum. Just earlier this month, it became the first country to lock in a new trade deal with the US. Worry remains, as that deal has not yet been executed in stone.
The recent developments also prompted questions about the UK’s zero-tariff trade deal with the United States on steel and aluminum. The UK, having left the EU following the 2016 Brexit referendum, was the first country to secure a trade deal with the US earlier this month. However, concerns linger as that agreement has yet to be officially signed.