US president Donald Trump said on Thursday the United States would impose tariffs of 25 per cent on steel imports and 10 per cent on imported aluminum next week.
At a meeting with US industry officials at the White House, Mr Trump vowed to rebuild US steel and aluminum industries, saying they had been treated unfairly by other countries for decades.
The move is likely to increase tensions with China, whose top trade official Lui He is in Washington for trade talks.
An early morning tweet from Trump – stating that the steel and aluminum sectors needed protecting from unfair trade – drove shares in domestic industries sharply higher.
AK Steel Holding was up 2.8 per cent, US Steel Corp was up 2.3 per cent and Nucor rose 1 per cent. By contrast, industrial stocks such as Boeing fell, with traders citing tariffs, which would hit manufacturers.
Impact on jobs
The administration says duties would protect US industry, but critics say they would raise costs for industry and fail to deliver on a campaign pledge to boost domestic jobs.
Mr Trump tweeted on Thursday that US steel and aluminum companies needed “free, fair and smart trade”. He has indicated he favours a duty of 24 per cent on steel imports.
The administration has also cited national security interests for its action, saying the US needs domestic supply for its tanks and warships. The Department of Defense has recommended targeted steel tariffs and a delay in aluminum duties.
China target
Although China only accounts for 2 per cent of US steel imports, its massive industry expansion has helped produce a global glut of steel that has driven down prices.
China has indicated it could retaliate against US steel tariffs by targeting imports of US agricultural commodities, such as soybeans, of which America is the largest supplier.
Trade tensions between the US and China have risen since Mr Trump took office in 2017 and the administration is also pushing on what it regards as forced technology transfers to China.
Shares of Asian steel producers such as South Korea's POSCO and Nippon Steel fell overnight.
US decline
While American steelmakers lost three quarters of their jobs between 1962 and 2005, a major study by the American Economic Association showed that much of this had been due to improved production technology, as output per worker rose fivefold.
“Thus, even if trade protection leads to increased domestic production, increases in employment may be far less than many hope,” a report from the highly regarded independent Econofact economist network said last week.
Consumers of steel and aluminum have lobbied hard against the tariffs. Econofact said in its report that two million jobs were in industries that use steel “intensively”, including auto parts, household appliances, farm machinery and oil equipment.
Jobs in the consuming industries are concentrated in California, Texas, the Northeastern and Midwestern states that comprise the rust belt and states in the Southeast.
“Across many states, the number of jobs adversely affected in these steel-using industries could far exceed any steel jobs saved,” Econofact warned.
“Past experience also shows that unilateral action like Section 232 tariffs will invite retaliation – the Bush-era steel tariffs led many countries to target politically sensitive US exports like Florida oranges and North Carolina textiles.”
The European Union reacted swiftly, saying it would react firmly with a proposal within days for WTO-compatible countermeasures against the US for trade restrictions on steel and aluminum, which it called a “blatant intervention” to protect US industry.
“We strongly regret this step, which appears to represent a blatant intervention to protect US domestic industry and not to be based on any national security justification,” the European Commission chief executive Jean-Claude Juncker said in a statement.
“We will not sit idly while our industry is hit with unfair measures that put thousands of European jobs at risk ... The EU will react firmly and commensurately to defend our interests.” – Reuters
