After ordering and quickly rescinding tariff declarations against Canada and Mexico last week, while imposing tariffs on China, President Donald Trump has moved onto his next target on the trade front: aluminum and steel.
Across-the-board tariffs on two critical commodities.
Trump announced over the weekend that the U.S. would impose 25 percent tariffs on aluminum and steel across-the-board against all countries, including Canada and Mexico. The tariffs are expected to go into force today, February 10, 2025.
Trump said in a statement aboard Air Force One: “Any steel coming into the United states is going to have a 25 percent tariff”, before adding “Aluminum, too.” With his move, Trump is once again heading a confrontation against some lead U.S. importers of steel and aluminum products. For example, Canada was the U.S.’s largest import partner for steel last year, with Brazil, Mexico, and South Korea among other leading importers to the U.S. Canada also imports a high volume of aluminum into the U.S. as one of the U.S.’s strongest trading partners.
As with all tariff decisions since Trump was inaugurated, much can change.
The world’s countries, especially leading U.S. allies, have responded with a mix of anger, bewilderment, and confusion when it comes to tariff proposals and announcements over the past few weeks. There is a real debate whether President Trump intends to impose the tariffs proposed or is merely using the threat/announcement of tariffs to extract concessions from U.S. trading partners.
In his first term in office, Trump also imposed steel and aluminum, including on Canada and Mexico. Back then, these allies were angry with the U.S., but the frustration led to the U.S., Canada, and Mexico signing the U.S.-Mexico-Canada Agreement, colloquially known as the USMCA. USMCA is a revision of the 1994 North American Free Trade Agreement (NAFTA), which Trump campaigned on reversing in his 2016 campaign. Once USMCA was signed and ratified, the tariffs against Canada and Mexico were suspended.
There may still be agreements between the U.S. and specific countries, and Trump may yet announce that these tariffs will be postponed – either for a limited period or indefinitely. However, many countries will surely be paying a 25 percent tariff as of this week, as deals won’t be made with the vast-majority of nations.
What will be the reactions to the newly-announced tariffs?
Last week, the world’s financial markets reacted poorly to the prospect of the U.S., the world’s leading trade partner, imposing tariffs on Canada and Mexico. After markets dropped by a sizable percentage, President Trump and the leaders of Canada and Mexico announced deals had been reached.
If the 25 percent steel and aluminum tariffs go into effect this week, the markets may again revolt, but on a more limited scale. They may price-in the possibility of near-term deals being reached between Trump and other countries.
However, the longer-term impact of this tariff announcement – and others by the U.S. in recent weeks – is that foreign trading partners will likely cycle between anger at the U.S. and hopes that newer, fairer deals are reached. After all, no country wants to lose a strong trade relationship with the world’s largest buyer of many commodities. Only time will tell how the situation develops.
