Summary

Companies Trump raises aluminum tariffs to 25% from 10%

Trump targets downstream steel products for tariffs

Trump also promises broader reciprocal tariffs

WASHINGTON, Feb 10 (Reuters) – U.S. President Donald Trump substantially raised tariffs on steel and aluminum imports on Monday to a flat 25% “without exceptions or exemptions” in a move he hopes will aid the struggling industries in the United States but which also risks sparking a multi-front trade war.

Trump signed proclamations raising the U.S. tariff rate on aluminum to 25% from his previous 10% rate and eliminating country exceptions and quota deals as well as hundreds of thousands of product-specific tariff exclusions for both metals. A White House official confirmed the measures would take effect on March 4.

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The tariffs will apply to millions of tons of steel and aluminum imports from Canada, Brazil, Mexico, South Korea and other countries that had been entering the U.S. duty free under the carve-outs.

The move will simplify tariffs on the metals “so that everyone can understand exactly what it means,” Trump told reporters. “It’s 25% without exceptions or exemptions. That’s all countries, no matter where it comes from, all countries.”

Trump later said he would give “great consideration” to Australia’s request for an exemption to the steel tariffs due to that country’s trade deficit with the U.S.

The proclamations were extensions of Trump’s 2018 Section 232 tariffs to protect domestic steel and aluminum makers on national security grounds. A White House official said the exemptions had eroded the effectiveness of these measures.

Trump also will impose a new North American standard requiring steel imports to be “melted and poured” and aluminum to be “smelted and cast” within the region to curb U.S. imports of minimally processed Chinese and Russian metals that circumvent other tariffs.

The action also extends the tariffs to downstream products that use foreign-made steel, including fabricated structural steel, aluminum extrusions and steel strand for pre-stressed concrete, a White House official said.

“The steel and aluminum tariffs 2.0 will put an end to foreign dumping, boost domestic production and secure our steel and aluminum industries as the backbone and pillar industries of America’s economic and national security,” Trump’s trade adviser Peter Navarro told reporters.

As he signed the order at the White House, Trump said he would follow Monday’s action with announcements about reciprocal tariffs on all countries that impose duties on U.S. goods over the next two days, and said he was also looking at tariffs on cars, semiconductors and pharmaceuticals.

Asked about threats of retaliation by other countries against his new tariffs, Trump said: “I don’t mind.”

U.S. data showed aluminum smelters produced just 670,000 metric tons of the metal last year, down from 3.7 million in 2000. Plant closures in recent years including in Kentucky and Missouri have left the country largely reliant on imports.

Steel imports accounted for about 23% of American steel consumption in 2023, according to American Iron and Steel Institute , opens new tab data, with Canada, Brazil and Mexico the largest suppliers.

Canada , whose abundant hydropower resources aid its metal production, accounted for nearly 80% of U.S. primary aluminum imports in 2024.

Canada’s industry minister said the U.S. tariffs were “totally unjustified”, with Canadian steel and aluminum supporting key U.S. industries including defense, shipbuilding, energy and autos.

“This is making North America more competitive and secure,” Francois-Philippe Champagne said in a statement. “We are consulting with our international partners as we examine the details. Our response will be clear and calibrated.”

Item 1 of 8 A steel worker stands amid sparks of raw iron coming from a blast furnace at a steel factory in Duisburg, western Germany, November 14, 2022. REUTERS/Wolfgang Rattay/File Photo [1/8] A steel worker stands amid sparks of raw iron coming from a blast furnace at a steel factory in Duisburg, western Germany, November 14, 2022. REUTERS/Wolfgang Rattay/File Photo Purchase Licensing Rights , opens new tab

While China exports only tiny volumes of steel to the U.S., it is responsible for much of the world’s excess steel capacity, according to the U.S. It says subsidized production in China forces other countries to export more and leads to transshipment of Chinese steel through other countries into the U.S. to avoid tariffs and other trade restrictions.

Following losses in Asian and European steelmakers on Monday, shares of Chinese steelmakers dropped further on Tuesday, while shares in U.S. steel and aluminum makers jumped ahead of the proclamations.

COLD WAR TRADE LAW

Trump first targeted steel and aluminum for tariffs in 2018 under a Cold War-era national security law. He later granted several countries exemptions, including Canada, Mexico and Australia, and struck duty-free quota deals for Brazil, South Korea and Argentina based on pre-tariff volumes.

Trump’s successor, former president Joe Biden, later negotiated duty-free quotas for Britain, Japan and the EU.

“We applaud the president for instituting these 25% tariffs on steel imports and getting rid of exclusions, carveouts and quotas that are based on antiquated data,” said Philip Bell, president of the Steel Manufacturers Association.

These were based on 2015-2017 import levels that no longer reflect current market dynamics, Bell said.

U.S. 2024 vs 2023 steel product imports by country of origin

The European Commission said it saw no justification for the tariffs and said President Ursula von der Leyen would meet U.S. Vice President JD Vance in Paris on Tuesday during an AI summit.

In South Korea , the Industry Ministry called in steelmakers to discuss how to minimize the impact of tariffs.

RECIPROCAL TARIFFS

Trump has promised detailed information on Tuesday or Wednesday on his reciprocal tariff plan. He has long complained about the EU’s 10% tariff on auto imports, much higher than the U.S. car rate of 2.5%. However, the U.S. applies a 25% tariff on pickup trucks, a vital source of profit for Detroit automakers like General Motors (GM.N) , opens new tab

Overall, the U.S. trade-weighted average tariff rate is about 2.2%, according to World Trade Organization data, compared to 12% for India, 6.7% for Brazil, 5.1% for Vietnam and 2.7% for the EU

Simple average and trade-weighted tariff rates by country

Indian Prime Minister Narendra Modi is preparing tariff cuts ahead of a Wednesday meeting with Trump that could boost American exports, Indian government officials said.

Trump has previously called India a “very big abuser” on trade, and his top economic adviser Kevin Hassett singled out the country as having “enormously high” tariffs in a CNBC interview.

Trump had already threatened to impose tariffs of 25% on all imports from America’s two largest trading partners, Canada and Mexico, saying they must do more to halt the flow of drugs and migrants across the U.S. border. After some border security concessions, Trump paused the tariffs until March 1.

Reporting by Steve Holland, Andrea Shalal, Jeff Mason and David Lawder; Writing by David Lawder, Andy Sullivan and Kevin Liffey; Additional reporting by Lidia Kelly in Melbourne, David Ljunggren and Costas Pitas; Editing by Barbara Lewis, Sharon Singleton, Dan Burns, Nick Zieminski, David Gregorio, Lincoln Feast and Michael Perry

Our Standards: The Thomson Reuters Trust Principles. , opens new tab

A tariff is a tax that one country places on another country’s goods. In this case, the United States has put an extra tax on Canadian products coming into the country – which are called imports. It means American importers, from small businesses to big companies, who want to use or sell Canadian products have to pay the extra fee when they bring those goods across the border.

For the average American bringing in a single Canadian product, like a bottle of Okanagan wine, the tax could just come out to a few more dollars.

But let’s say there’s an American company that imports $5 million worth of Canadian wheat every year. A 25 per cent tariff on Canadian wheat means that business will have to pay more than $1.2 million just to bring that wheat into their country.

Suddenly, Canadian products aren’t so attractive to American customers anymore. The goal, for the United States, is that American consumers will be encouraged to spend their money on domestic products instead – which fuels the national economy.

But tariffs can also be a punitive political tool to put pressure on another nation. (In this case, it’s Canada.) And economists warn the general public ultimately pays the bill.

CNN —

President Donald Trump says he believes tariffs are a panacea: a catch-all economic tool that can restore America’s manufacturing prowess, bring foreign nations to heel on key disputes, restore the balance of trade and bring in gobs of money that can help pay off the US deficit and reduce Americans’ tax burdens.

Trump is correct that tariffs can help fulfill many if not all of those promises: When used effectively, tariffs can help boost production at home by making foreign goods more expensive. Because America is an enormous and diverse economy that doesn’t rely on trade as much as its neighbors, the United States could use tariffs to inflict serious damage on other countries’ economies without plunging itself into a recession. Revenue raised by tariffs could help offset some of its deficits.

But, as the saying goes, if it sounds too good to be true, it usually is.

The problem with Trump’s plan is that tariffs can’t achieve all of those goals at the same time. That’s because Trump’s aims are often contradictory.

For example, if tariffs are a pressure campaign, they have to go away once the countries acquiesce – which means there will be no tariffs to restore the trade balance. If tariffs are designed to promote America’s manufacturing sector, they can’t also raise revenue to offset deficits – If Americans switch to made-in-the-USA goods, then who pays the tariff on foreign products?

And Trump’s tariff plan might do more to damage to America’s economy than to help it. Trump has recently acknowledged that tariffs will cause a “disturbance.” And stocks plunged Monday after Trump declined to predict that America would avoid a recession as a result of his trade policies.

But Trump appears to be a true believer in tariffs. He frequently praises former President William McKinley, who over 100 years ago imposed hefty tariffs on foreign nations before America had an income tax. Trump has frequently said tariff is “a beautiful word” that will make American rich again.

Despite frequent delays and retreats, Trump appears determined to impose enormous tariffs on foreign-made products starting on April 2 – for a variety of reasons.

Fentanyl and immigration

Trump has said the 20% tariffs he imposed on China and 25% tariffs he has imposed – and mostly delayed – on Mexico and Canada are designed to pressure those countries to stop the flow of fentanyl and illegal immigration into the United States.

Commerce Secretary Howard Lutnick has said repeatedly the delayed tariffs, now scheduled to go into effect April 2, will remain in place until Trump believes the countries have made significant strides at stemming the entry of fentanyl.

“If fentanyl ends, I think these will come off,” Lutnick said Sunday on NBC’s “Meet the Press.” “But if fentanyl does not end or he’s uncertain about it, they will stay this way until he is comfortable. This is black and white. You’ve got to save American lives.”

Trump’s tariffs on Mexico and Canada are part of “a drug war, not a trade war,” National Economic Council director Kevin Hassett echoed on ABC News’ “This Week” Sunday.

Raising revenue

Meanwhile, Trump has made astronomical estimates about how much money tariffs can raise.

“We will take in trillions and trillions of dollars and create jobs like we have never seen before,” Trump said during his joint address to Congress last week. “Tariffs are about making America rich again and making America great again.”

Containers are pictured at the port in Ensenada, Baja California state, Mexico. Guillermo Arias/AFP/Getty Images

“We’re going to become so rich you’re not going to know where to spend all that money,” Trump said on Air Force One Sunday.

The Committee for a Responsible Federal Budget estimates that Trump’s tariffs on China, Mexico and Canada would bring in about $120 billion a year and $1.3 trillion over the course of 10 years.

But here’s the problem: They’re not designed to remain in place that long. If the Trump administration says they’ll “come off” if the fentanyl problem is resolved, we should hope they won’t be in place for a decade.

In fact, Hassett said progress on fentanyl is why Trump has twice delayed the tariffs on Canada and Mexico: “As we’ve watched them make progress on the drug war, then we’ve relaxed some of the tariffs that we put on them because they’re making progress,” Hassett said.

Manufacturing jobs

“I’m telling you, you just watch. We’re going to have jobs. We’re going to have open factories. It’s going to be great,” Trump said on Air Force One on Sunday.

To accomplish that, Trump has often advocated for lower taxes at home and higher taxes for goods made abroad.

During his joint address to Congress Trump noted one of his key selling-points for tariffs: “We want to cut taxes on domestic production and all manufacturing,” he said. “If you don’t make your product in America, however, under the Trump administration, you will pay a tariff and, in some cases, a rather large one.”

It’s a carrot-and-stick approach to trade policy that Trump says will restore America’s manufacturing sector.

“That, along with our other policies, will allow our auto industry to absolutely boom. It’s going to boom,” Trump said last week.

As Trump routinely reminds companies: If you make products in America, you pay no tariffs. But if companies do as Trump asks, then America can’t raise tariff revenue from them.

Paying down debt and reducing taxes

Among Trump’s first actions as president at the outset of his second term was to order the Treasury Department to determine if it could establish an “External Revenue Service” to collect tariff revenue to pay down America’s debt and reduce taxes.

“Donald Trump announced the External Revenue Service, and his goal is very simple: to abolish the Internal Revenue Service and let all the outsiders pay,” Lutnick said on Fox News in late February.

In other words: America will raise so much money from President Donald Trump’s tariff plan that Americans will no longer need to pay income taxes.

The problem is America raises about $3 trillion each year from income taxes and also happens to import around $3 trillion worth of goods annually. So that means tariffs would have to be at least 100% on all imported goods for tariffs to replace income taxes – an unreasonable level that could cause a price shock for American consumers.

That almost certainly won’t happen. But higher prices could reduce consumer spending, hurting the economy – and the manufacturers tariffs are trying to save.

Restoring fairness

“We have been ripped off for decades by nearly every country on Earth, and we will not let that happen any longer,” Trump said last week during his address. “Other countries have used tariffs against us for decades, and now it’s our turn to start using them against those other countries.”

Trump has promised reciprocal tariffs on a number of products starting April 2, matching foreign countries’ tariffs dollar for dollar to restore trade fairness. When America is charged a higher tariff and has a trade imbalance with other countries, Trump has often incorrectly labeled that a “subsidy” or a “loss.”

“They are, in effect, receiving subsidies of hundreds of billions of dollars,” Trump said during his address. “The United States will not be doing that any longer.”

Economists largely agree that trade deficit are not losses or subsidies. In fact, they can be a reflection of a strong economy.

Tariffs aren’t likely to meaningfully narrow the trade gap America has with other countries. If it did, it could be a signal that America’s spending power was diminishing.

Q: Among the reasons given for tariffs is the need to protect U.S. jobs and reshore or inshore manufacturing. Is there evidence that this will happen?

The central claim is that America can be revitalized and indeed the American middle class can be revitalized; workers without college education can be helped, and left-behind places can be restored if we stimulate manufacturing production in the United States. But at the moment it’s important to realize and recognize that only just over 8% of Americans work in manufacturing and even if we were to entirely close the trade deficit that we have in manufactured goods, it’s likely that manufacturing employment would increase by somewhere between one or two percentage points. So instead of around 8% of Americans working in manufacturing, 10% of Americans would work in manufacturing.

Manufacturing is simply too small to have a significant impact on the American labor force and both Presidents Biden and Trump have been obsessed with restoring American manufacturing. In my own view, the claims that they make that somehow this is going to have a significant impact on the availability of jobs for the middle class is completely unrealistic.

There are some manufactured products that are very important. We need semiconductors—they’re important for artificial intelligence, they’re important for national security. We need to decarbonize, and so electric vehicles and solar panels are important. So there are certain kinds of products which can help us meet national goals. But it is unrealistic to see manufacturing as a policy that is going to have a significant impact on the major problems of less educated Americans.

Both Biden and Trump are in a sense appealing to nostalgia for a world that no longer exists, in which manufacturing is a major driver of access to the middle class. They’re about 30 to 40 years out of date because, as a result of both automation and the way we spend our money today, manufacturing has shrunk and is a relatively small part of our economy.

Q: Will tariffs help raise revenues, as the administration has claimed?

It’s problematic, because the higher the tariffs that you impose, at some point the less revenue you’re actually going to receive. The kind of estimates we’re seeing from the administration are that they will raise $600 billion. I think that’s an extremely optimistic view because as you make products more expensive, consumers will pay less or will be prepared to spend less on those imported products. In addition, one of the purposes of the tariffs is to get foreigners to come and invest in the United States. Well, if they do, they’ll no longer be paying the tariff. So ironically, the long run achievement of goals like bringing a lot of investment into the United States to replace the imports is going to undermine the goal of raising revenue, and that’s why it’s very difficult to know exactly how much is going to be raised.

But it’s important to point out that people, as they get richer, spend less and less on goods and more on services, and that means that tariffs have a regressive incidence because they take much more out of the pockets of poor Americans than they do of rich Americans. So to the degree that we now raise revenue using tariffs and use the money we save or the money we raise to reduce the taxes patented after the previous Trump tax cuts, this is an extremely regressive move for American households and the estimates are that the typical household is going to spend an additional $2,000 to $4,000, depending on which economist you believe.

There’s also an exaggeration of the employment impact that you’re going to get from tariffs. Let’s take the example of a tariff on steel. You might create more jobs in the steel industry, but you will also raise input costs for the users of steel, and this in turn affects somewhere between 60 and 80 jobs for every one you save in the steel industry itself. So in the aggregate, the tariffs can be counterproductive, especially if they’re put on inputs which are used in producing other products.

Q: Is the United States’ large trade deficit sustainable?

I think firstly there’s an obsession with goods that isn’t the right measure. What we ought to be looking at is not only our trade in goods, but also our trade in services, and we have a significant surplus in our trade in services. Therefore, when you aggregate the two together, you get a much smaller percentage and a smaller number relative to our GDP.

The second point is that we’ve been running deficits for 30 or 40 years, and what it means is that the United States is borrowing much more from the rest of the world than we lend, and therefore our net position has been declining over time. But remarkably, Americans earn more from, or earn just about as much from, their total investments abroad as foreigners earn in the United States. So if you look historically, we have felt no additional pressure about sustainability of our position. As long as we borrow the money and use it productively to increase investment in the United States, it is eminently sustainable, as with any investment.

Q: How would U.S. exports be impacted?

One of the effects of the tariffs is going to be over the medium term to strengthen the American dollar because Americans will need less foreign exchange in order to import, and when the dollar gets stronger, this affects all American exporters, whether they are exporting goods or whether they are exporting services.

A second point is that foreigners are not going to take these tariffs lying down. They are going to retaliate. Much of their retaliation can take the form of higher tariffs on American exports of goods, but in addition, foreigners are talking about levying taxes on the sales of American services and indeed some of the information technology company services that are being sold abroad. So there are going to be an adverse impact on exporters virtually any way you look—there are going to be higher input costs, they are going to have to sell into markets which are closing to them because of foreign retaliation, and the currency is going to get stronger and so their products are going to get more expensive.