Steel and Aluminum Tariffs Forge Fears

The announcement in early March by President Donald Trump of 25% and 10% tariffs on steel and aluminum imports, respectively, have stoked fears of trade wars and rising infrastructure costs while delighting the domestic steel industry.

The United Steel Workers (USW) praised the move, and in a statement claimed that the penalties would “restore market-based economics that ensure our domestic producers can achieve a fair return.” They further asserted that Canada, which exports more steel to the U.S. than another other country, was “not the problem” and should be exempt from any tariff. Canada fills 16% of steel demand in the U.S. and does not engage in illegal product dumping, according to union representatives.

President Trump tweeted on March 4 that if NAFTA can be renegotiated, he wouldn’t impose the tariffs. “We have large trade deficits with Mexico and Canada. NAFTA, which is under renegotiation right now, has been a bad deal for U.S.A. Massive relocation of companies & jobs. Tariffs on Steel and Aluminum will only come off if new & fair NAFTA agreement is signed…” The European Union, Canada, and Mexico were ultimately granted temporary exemptions from the tariffs.

Associated General Contractors (AGC) chief economist Ken Simonson stated that adding to the already-high prices for aluminum and steel could wreak havoc on both public and private project budgets, increasing the “cost of pretty much every construction project, ranging from a single-family home to a refinery to a bridge.” AGC noted the producer price index for inputs to construction goods rose 0.8% in March and 5.8% over the previous 12 months.

Steel- and aluminum-consuming companies can appeal to the Commerce Department for exemptions provided they can show they can’t obtain the metals they need from U.S. producers. As of April 9, the department has received 2420 such requests.

Further tariffs on 1300 products across 872 categories—many targeted at Chinese imports—were announced in April and raised further fears of inflation and retaliatory tariffs on American goods.