Donald Trump’s 25% tariffs on all steel and aluminium imports go into effect

US President Donald Trump officially increased tariffs on all steel and aluminium imports to 25 per cent on Wednesday. He removed all exemptions from his 2018 tariffs on the metals and increased the tariffs on aluminium from 10 per cent.

Donald Trump already imposed separate tariffs on Canada, Mexico and China. He also plans to tax imports from the European Union, Brazil and South Korea by charging “reciprocal” rates starting on April 2, news agency Associated Press reported.

Trump's U-turn

Earlier in the day, Trump's threat Tuesday to double his planned tariffs on steel and aluminium from 25 per cent to 50 per cent for Canada led the provincial government of Ontario to suspend its planned surcharges on electricity sold to the United States.

As a result, White House trade adviser Peter Navarro said the US president pulled back on his doubling of steel and aluminium tariffs.

The federal government, however, chose to place a 25 per cent tariff on all steel and aluminium imports starting Wednesday.

‘Tariffs to invest in US factories'

Trump participated in a question and answer session Tuesday afternoon with the Business Roundtable, a trade association of CEOs that he wooed during the 2024 campaign with the promise of lower corporate tax rates for domestic manufacturers.

Trump told CEOs in the Business Roundtable on Tuesday that the tariffs were causing companies to invest in US factories. He argued that higher tariff rates would be more effective at bringing back factories.

“The higher it goes, the more likely it is they're going to build,” Trump told the group. “The biggest win is if they move into our country and produce jobs. That's a bigger win than the tariffs themselves, but the tariffs are going to be throwing off a lot of money to this country.”

Trump's 2018 tariffs on steel and aluminum were eroded by exemptions.

After Canada and Mexico agreed to his demand for a revamped North American trade deal in 2020, they avoided the import taxes on the metals.

Other US trading partners had import quotas supplant the tariffs. The first Trump administration also allowed US companies to request exemptions from the tariffs if, for instance, they couldn't find the steel they needed from domestic producers.

While Trump's tariffs could help steel and aluminium plants in the United States, they could also raise prices for manufacturers that use metals as raw materials.

Moreover, economists have found that the gains to the steel and aluminium industries were more than offset by the cost they imposed on “downstream'' manufacturers that use their products.

At these downstream companies, production fell by nearly USD 3.5 billion because of the tariffs in 2021, a loss that exceeded the USD 2.3 billion uptick in production that year by aluminium producers and steelmakers, the US International Trade Commission found in 2023.

Trump sees the tariffs as leading to more domestic factories, and the White House has noted that Volvo, Volkswagen and Honda are all exploring an increase to their U.S. footprint. But the prospect of higher prices, fewer sales and lower profits might cause some companies to refrain from investing in new facilities.

“If you're an executive in the boardroom, are you really going to tell your board it's the time to expand that assembly line?” said John Murphy, senior vice president at the U.S. Chamber of Commerce.

(With inputs from AP)