President Trump’s new 25% tariffs on all steel and aluminum imported into the United States took effect Wednesday, raising the stakes in what some analysts see as a rapidly developing global trade war.
In response to the U.S. tariffs, the European Union said it would impose retaliatory tariffs on U.S. imports worth about $28 billion starting on April 1. But the EU also signaled that it is interested in reaching an agreement with Trump to avoid the escalation. “Jobs are at stake, prices up — nobody needs that,” said Ursula von der Leyen, president of the European Commission.
Canada also responded, announcing new tariffs on roughly $20 billion worth of U.S. imports.
Trump said Wednesday that he has no plans to back down. “Of course I will respond,” Trump said at the White House, though he provided no details on what his next step might be.
Trump also made it clear that his use of tariffs is part of a larger effort to recover wealth “stolen” by foreign countries. “The United States of America is going to take back a lot of what was stolen from it by other countries and, frankly, by incompetent U.S. leadership,” he said. “We’re going to take back our wealth, and we’re going to take back a lot of the companies that left.”
For now, the next move we know about comes on April 2, when Trump has promised to impose a new set of “reciprocal” tariffs mirroring other countries’ levies on U.S. goods. Tariffs on automotive products produced in Mexico and Canada, currently suspended, are also scheduled to take effect on April 2.
Cost vs. benefits: Trump has provided a number of rationales for his trade offensive, including concerns about illegal immigration and drug trafficking, a desire to increase tariff revenues (which he claims are somehow paid by foreign nations rather than U.S. importers), and a long-term goal of rebuilding the U.S. industrial base. The new tariffs on steel and aluminum appear to be aligned with that third category, and economists say it could provide a boost to some domestic manufacturers of raw metals, who will benefit from reduced competition and higher prices.
However, the tariffs will also hurt U.S. manufacturers who use imported steel and aluminum as inputs in their products, which include vehicles, appliances and farm equipment. They will face steeply higher prices for materials, which will then be passed onto consumers at home and abroad.
In a 2022 analysis of tariffs placed on steel imports by former President George W. Bush, economist Lydia Cox found that more than 160,000 jobs were lost in steel-consuming industries as a result of the levies — a number far larger than the jobs created or saved by steel manufacturers, and larger than the overall domestic steel industry itself.
Tariffs are a “pretty blunt instrument,” Cox said in a recent interview, per CNBC, and they create “a lot of collateral damage.”
Earlier this year, former Treasury Secretary Lawrence Summers and former Sen. Phil Gramm made the same argument about the tariffs imposed on steel imports by Trump in 2018. “The tariffs on steel and aluminum created only a small number of jobs, but since for every worker in the steel and aluminum industries there are 36 workers employed in American industries that use steel and aluminum in production processes, those modest gains were offset by the jobs losses in industries that use steel and aluminum as inputs,” they wrote in an opinion piece in The Wall Street Journal. “With foreign retaliation, the estimated cost to the economy of jobs created by the 2018 tariffs on washing machines, steel and aluminum clearly amounted to many times what the jobs paid in wages.”