Trump steps up his 2018 tariffs on steel and aluminum, risking inflation on promise of more jobs

WASHINGTON — President Trump on Monday removed the exceptions and exemptions from his 2018 tariffs on steel, meaning that all steel imports will be taxed at a minimum of 25%. Trump also hiked his 2018 aluminum tariffs to 25% from 10%.

“We were being pummeled by both friend and foe alike,” Trump said as he signed two proclamations changing his orders during his first term. “It’s time for our great industries to come back to America.”

The moves are part of an aggressive push to reset global trade, with Trump saying that tax hikes on the people and companies buying foreign-made products ultimately will strengthen domestic manufacturing. But the tariffs will hit allies as the four biggest sources of U.S. steel imports are Canada, Brazil, Mexico and South Korea.

Trump also intends this week to reset U.S. taxes on all imports to match the levels charged by other countries. He has already placed 10% tariffs on China, which retaliated with tariffs of its own. He has also threatened tariffs on Mexico and Canada.

The tariffs carry inflation risks at a moment when voters are already weary of high prices. Trump maintains that the tariffs will level the playing field in international trade and make U.S. factories more competitive, such that any pain felt by consumers and businesses eventually would be worthwhile.

“‘Fairness’ is in the eye of the beholder, but the more fundamental question is whether the U.S. actually benefits from such new tariffs,” said Benn Steil, director of international economics at the Council on Foreign Relations, a New York-based nonpartisan think tank. “The costs to the U.S. will include higher prices to U.S. consumers, retaliatory tariffs abroad, and the loss of U.S. jobs and competitiveness in firms hit by higher input costs.”

Steil noted that other countries are adopting Trump’s approach from his first term as the president imposes tariffs on the premise that the imports create national security risks. That’s because national security-related tariffs are legally unchallengeable at the World Trade Organization.

“Not surprisingly, everything from ‘door frames’ to ‘alcoholic beverages’ have of late been subject to new import barriers in the developing world on the grounds of national security,” Steil said.

Of the roughly 29 million net tons of steel imported into the United States last year, slightly less than 2% came from China. But the White House maintains that exemptions to the tariffs provided over the previous four years by the Biden administration enabled steel and aluminum from China and Russia to go through other nations to reach the United States.

Although the tariffs could help the finances of steel mills and aluminum smelters, they also could increase costs for the manufacturers that use the metals as raw materials to make autos, appliances and other products.

Glenn Stevens Jr., executive director of MichAuto, said that the auto industry probably would need to raise prices in response to the tariffs. In turn, higher prices would decrease sales and hurt companies’ bottom lines, leading to fewer factory jobs.

“If you look at sudden tariffs to a system, there isn’t a lot of good that comes out of that,” said Stevens, his remarks challenging Trump’s statements that his policies would stimulate massive gains in auto industry jobs.

The White House has yet to fully counter economic analyses showing that tariffs would hurt growth and intensify inflation, saying only that such analyses are incomplete without including the full extent of Trump’s planned income tax cuts and regulatory curbs. But Trump has yet to propose a budget plan that would flesh out his policies so that economists could judge them.

Consumers appear to be anticipating that inflation will become a bigger problem. On Friday, the preliminary February results from the University of Michigan Surveys of Consumers found that year-ahead inflation expectations jumped to 4.3% from 3.3% the previous month.

The government inflation report scheduled to be released Wednesday is expected by economists to show consumer prices rising at 2.8%, which would suggest that the public sees tariffs as a major risk to their financial well-being.

The stock prices of steel companies climbed sharply Monday as investors assumed the tariffs would increase their profits. Cleveland-Cliffs, which wants to buy Pittsburgh’s U.S. Steel, rose 18%. U.S. Steel climbed 4.8%. Nucor increased almost 6%, and Steel Dynamics rose about 5%.

But companies that rely on steel and aluminum saw their share prices decrease, as tariffs mean that the cost of their raw materials could increase. For example, shares in automaker General Motors were sold off Monday, which could ultimately signal trouble for a manufacturing sector that Trump has promised to revive.

“We have far more steel and aluminum-consuming businesses — think construction, machinery and equipment manufacturing, auto manufacturing — than we do steel and aluminum producers, so the advantage created for the producers comes at a much greater cost to downstream users,” said Erica York, vice president of federal tax policy at the right-leaning Tax Foundation.

Trump reiterated as he signed the proclamations that more tariffs would be coming on computer chips, autos and pharmaceutical drugs. But the president said that the import taxes eventually would enable more steel mills and aluminum plants to open in the U.S. to avoid the tariffs.

“You’re ultimately going to have a price reduction because they’re going to make their steel here,” Trump said, adding that there also would be more jobs.

Howard Lutnick, Trump’s pick to be Commerce secretary, said the original 2018 tariffs created 120,000 jobs. It was unclear how he reached that figure. The primary metals industry added roughly 14,000 jobs during the first 12 months that the steel and aluminum tariffs were originally imposed, though gains were quickly erased by the COVID-19 pandemic in 2020.

Panos Kouvelis, a professor specializing in supply chains at Washington University in St. Louis, co-wrote a research paper last year finding that the 2018 tariffs did not deliver as Trump had promised.

“Simple economics will tell you if prices go up then demand will go down,” Kouvelis said, adding that what was needed instead were incentives that were specific to advanced technologies, national security needs and pharmaceutical needs.

“It requires smart, targeted industrial policies,” he said, “instead of general tariffs on everything.”

Boak writes for the Associated Press. AP writer Isabella Volmert in Lansing, Mich., contributed to this report.