If the quick freeze and attempted shut down of American foreign assistance through USAID was not enough, on February 10 U.S. President Donald Trump again disrupted the global trade and financial system through issuance of a new and allegedly straightforward set of tariffs on all takers for America’s steel and aluminum imports.
Using Cold War-era national security legislation as a basis, the Executive Order that Trump signed removed all country-specific exemptions, quotas and product-specific exclusions that he said had made the existing tariff structure ineffective. Calling his announcement a “reform” and “simplification of the system,” the new tariffs come into effect on March 4.
One innovation is a new North American standard requiring steel imports to be “melted and poured” and aluminum to be “smelted and cast” within the region to reduce imports of minimally processed Chinese and Russian metals that manage to circumvent other tariffs. There is also an increased focus on applying tariffs to downstream production.
Wait for new exceptions and cut-outs to the new rules to be negotiated, as they were under the first Trump presidency. These are already under discussion, with an exception for Australia first on the list as it runs a trade deficit with the United States.
Global overcapacity
Steel imports accounted for about 23 percent of U.S. steel consumption in 2023, according to American Iron and Steel Institute, with Canada, Brazil and Mexico the largest suppliers. Canada, with extensive hydropower resources to aid its metal production, accounted for nearly 80 percent of U.S. primary aluminum imports in 2024.
While China directly exports only small volumes of steel to the United States, it is the source of much of the world’s excess steel capacity. Washington believes subsidized production in China forces other countries to export more and generates massive transshipments of Chinese steel through other countries into the U.S. to avoid tariffs and other trade restrictions. Dumped Chinese steel has to end up somewhere.
Trump is talking tough when it comes to potential retaliation from trade partners, saying “I don’t mind” when asked about such risks. He has also said there will be reciprocal tariffs announced on all countries that impose duties on U.S. goods over the next several days, which is actually faster action than the trade policy review he authorized on taking office. He also noted some of these tariffs would stack on top of other threatened tariff actions.
To lay out the Trump administration’s argument for the tariff decision, we are providing an abridged summary of the February 11 White House Fact sheet on the new tariffs:
PRESIDENT DONALD J TRUMP RESTORES SECTION 232 TARIFFS
COUNTERING TRADE PRACTICES THAT UNDERMINE NATIONAL SECURITY: Yesterday (February 10), President Donald J. Trump signed proclamations to close existing loopholes and exemptions to restore a true 25 percent tariff on steel and elevate the tariff to 25 percent on aluminum.
President Trump is taking action to protect America’s critical steel and aluminum industries, which have been harmed by unfair trade practices and global excess capacity.
President Trump is reinstating the full 25 percent tariff on steel imports and increasing tariffs on aluminum imports to 25 percent.
By granting exemptions to certain countries in years past, the United States inadvertently created loopholes that were exploited by China and others with excess steel and aluminum capacity, undermining the purpose of these exemptions.
The President is exercising his authority under Section 232 of the Trade Expansion Act of 1962 to adjust imports of steel and aluminum to protect our national security, which provides the President with authority to adjust imports being brought into the United States in quantities or under circumstances that threaten to impair national security.
RESTORING FAIRNESS TO STEEL AND ALUMINUM MARKETS: President Trump is taking action to end unfair trade practices and the global dumping of steel and aluminum.
Foreign nations have been flooding the United States market with cheap steel and aluminum, often subsidized by their governments.
A report from the first Trump Administration found that steel import levels and global excess were weakening our domestic economy and threatening to impair national security.
The report found that excess production and capacity, particularly in China, has been a major factor in the decline of domestic aluminum production.
While the domestic steel industry briefly achieved 80 percent utilization in 2021, subsequent trade pressure following the COVID-19 pandemic has depressed domestic production. In 2022 and 2023, capacity utilization fell to 77.3 percent and 75.3 percent, respectively. High import volumes from sources exempt from Section 232 tariffs are a major factor in depressing domestic production volumes.
For aluminum, there was an increase in the capacity utilization rate between 2017 and 2019, from 40 percent to 61 percent during that period. But since 2019, the aluminum capacity utilization has once again seen a steady decline, falling from 61 percent to 55 percent between 2019 and 2023.
The United States does not want to be in a position where it would be unable to meet demand for national defense and critical infrastructure in a national emergency.
STRENGTHENING AMERICA’S MANUFACTURING INDUSTRY: President Trump’s decision to close existing loopholes and exemptions will strengthen the American steel and aluminum industries.
In his first term, President Trump imposed Section 232 tariffs to protect the American steel and aluminum industries from unfair foreign competition.
The steel tariffs that President Trump implemented led to thousands of jobs gained and higher wages in the metals industry.
These tariffs were hailed as a “boon” for Minnesota’s iron ore industry, with state officials crediting tariffs for bolstering the local economy.
Steel and aluminum imports drastically decreased under President Trump, falling by nearly a third from 2016 to 2020.
The tariffs led to a wave in investment across the United States, with more than $10 billion committed to build new mills.
U.S. steelmakers, including the American Iron and Steel Institute and the Steel Manufacturers Association, have praised President Trump’s America First trade policy.
TARIFFS WORK: Studies have repeatedly shown that contrary to public rhetoric, tariffs can be an effective tool for achieving economic and strategic objectives.
A 2024 study on the effects of President Trump’s tariffs in his first Administration found that they “strengthened the U.S. economy,” and “led to significant reshoring” in industries like manufacturing and steel production.
A 2023 report by the U.S. International Trade Commission that analyzed the effects of Section 232 and 301 tariffs on more than $300 billion of U.S. imports found that the tariffs reduced imports from China, effectively stimulated more U.S. production of the tariffed goods, with very minor effects on prices.
According to the Economic Policy Institute, the tariffs implemented by President Trump during his first Administration “clearly showed no correlation with inflation” and only had a temporary effect on overall price levels.
Former Biden Treasury Secretary Janet Yellen affirmed last year that tariffs do not raise prices: “I don’t believe that American consumers will see any meaningful increase in the prices that they face.”
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