Trump’s latest tariffs, from four cities

Brave that deja vu, because Donald Trump has now signed another executive order imposing 25% levies on all aluminium and steel imports, effective 12 March. 

So to make tariffs seem not-boring, let’s take a quick musical tour of four capitals… 

1. 🇺🇸 Washington DC –‘Everybody hurts’ by R.E.M

Notwithstanding the buzz or shock, these US tariffs aren’t new. The president imposed broadly similar levies back during Trump 1.0, before carving out exemptions for Australia, and later Canada and Mexico. Biden then expanded the exemptions list.

This time, however, Trump insists there’ll be no “exceptions or exemptions”. Why?

His stated rationale is national security. That’s partly for legal reasons — his Trump 1.0 tariffs used a national security authority (s232 of the Trade Expansion Act), and he’s relying on that same authority to amend them now. But if you have a spare nine hours and would like to read his full 2018 report, you’ll see it draws two national security links:

• i) America needs a strong steel and aluminium sector to meet future defence requirements (tanks, ships, and planes use a lot of metal), plus
• ii) there’s a broader risk of deindustrialisation undermining long-term US security via a loss of relevant skills, government revenue, and employment

Of course, when discussing this stuff in public, the president often leans more into the economic and political angle: what he describes as America’s rusting heartland, the loss of good blue-collar jobs, and the blame he ascribes to trade partners.

Anyway, Trump now argues the various exemptions have hollowed out his original tariffs, with China’s vast metal surpluses still hitting the US via third countries, whether because of direct transhipment or displacing local supplies which then get exported to the US. So for Donald Trump, this week’s announcement is about closing loop-holes.  

2. 🇨🇦 Ottawa –‘Ain’t Gonna Look the Other Way’ by Celine Dion

Let’s start with Canada, because it’s America’s single-largest supplier, not to mention one of America’s closest allies. And Trump’s order cites an increase in imports from Canada (and Mexico) as evidence that something’s fishy.

But from Canada’s perspective, rather than undermining US national security, its own industry supports US security — Canadian metals end up in US fighter jets, for example.

The real lynchpin here is aluminium. Canada sells to the US more than triple the amount of aluminium the US can actually produce itself. And this isn’t skulduggery, either. It’s energy — Canada has plentiful, cheap hydropower, ideal for smelting aluminium.

To boot, a third of Canada’s smelters are even US-owned. That level of US-Canada integration is why the US aluminium industry briefed Trump last year, effectively describing the US-Canada industry as a single entity to be protected. It’s also why Trump’s first-term tariffs only slapped aluminium with a 10% levy.

3. 🇪🇺 Brussels –‘Mad About You’ by Hooverphonic

The EU only sells half the steel to the US that Canada sells, but the broader EU context is where the story is at: European steel exports have collapsed in half over the past decade, partly due to the continent’s own high energy costs, but also due to the same low-cost products flooding markets from China. And the US is still the EU’s second-largest market.

So, fearing its own rapid deindustrialisation, the prospect of now getting kicked while it’s down, and any cheap foreign metals responding to US tariffs by flooding the EU instead, the bloc is vowing to impose “firm and proportionate countermeasures” — last time, that included targeted tariffs on US-made Harley-Davidsons and motorboats (it was a tough time to be going through a mid-life crisis).

But the Europeans are holding fire for now, at least until after Ursula von der Leyen’s meeting with JD Vance, scheduled for today (Wednesday).  

4. 🇨🇳 Beijing – ‘Eggshell’ by Faye Wong

The world’s biggest steel exporter is seemingly now the chillest of the bunch. Pre-existing tariffs mean China exports relatively little steel or aluminium directly to the US, meaning these latest US tariffs will have little direct or immediate impact on China.

But things are still spicy — China produces more steel and aluminium each year than the rest of the world combined. And as its property sector crashes, its mills have exported more and more of that spare production abroad to stay open. That’s rattling countries everywhere, with many (including Canada, btw) slapping tariffs in response.

And still, the message behind Trump’s tariffs is he wants more countries to go harder.

INTRIGUE’S TAKE

Interestingly, markets have mostly shrugged off this latest round of Trump tariffs. That might be because a) they’re already priced in (Trump campaigned on this stuff), b) they’re assuming it’s just another ‘threaten then negotiate’ play, and/or c) they’re assuming at least the main players like Canada will get an exemption again.

Either way, last time around there was research suggesting the tariffs resulted in maybe 1,000 net new US steel-maker jobs, but at the cost of 75,000 US steel-user (manufacturing) jobs as metal inputs suddenly got more expensive. So we may well see similar impacts this time around, though Trump’s assessment seems to be it’s worth it.

But again, that’ll depend in part on how US trade partners play this — if they duly slap more tariffs on China’s low-cost output, that kind of win might offer Trump an exit ramp. But even then, you can already see and hear the exasperation among US allies. And it’s really with allies that the US stands the best chance of competing against China.

Also worth noting:

• The US imports around 25% of its steel, and 75% of its aluminium. It produced around half the world’s steel during the 1940s, and is now down to around 5%.
• Trump has again flagged the possibility of granting an exemption to Australia, a US ally where the US has a trade surplus, with relatively minor steel output.
• American firms submitted 100,000 exemption requests within the first year of the steel and aluminium tariffs imposed during Trump 1.0.