Metal Mayhem
Trump's announcement of a 25% tariff on steel and aluminium imports from all countries, with implementation expected "almost immediately," has sparked significant concern. The US remains heavily dependent on metal imports, particularly aluminium, which accounted for over 80% of domestic demand in 2023, with major suppliers including Canada and Mexico. These tariffs are anticipated to substantially impact the automotive, aerospace, and energy industries, which rely heavily on these specialised metals.
The international response has been swift and critical. The Canadian Steel Producers Association condemned the tariffs as "baseless and unwarranted," whilst the European Commission pledged to protect European businesses, workers, and consumers. South Korea's Ministry of Industry, Trade, and Energy held an emergency meeting with steel executives, and Australian Prime Minister Anthony Albanese sought exemptions, citing Australian investments in the US steel industry. Following discussions with Albanese, Trump indicated he would give "great consideration" to exempting Australia from the tariffs.
The economic implications are far-reaching. The manufacturing sector is particularly vulnerable, with studies showing that steel-consuming jobs far outnumber steel-producing jobs, suggesting likely net job losses. Higher tariffs will increase production costs for manufacturers, raising prices for goods ranging from cars to household appliances. Analysts warn of heightened inflationary pressures, which could reduce consumer purchasing power and slow economic growth.
Academic research has been overwhelmingly critical of such policies. A Chicago Booth survey, conducted in 2018, of 43 economic experts revealed that none believed steel and aluminium tariffs would improve American welfare. The Tax Foundation's analysis suggests these tariffs have in fact consistently damaged the US economy and American consumers, by raising prices, and lowering economic output and employment since the trade wars began in 2018.
The imposition of high tariffs can also appreciate the value of the US dollar, making American exports less competitive and further worsening trade imbalances. Furthermore, tariffs disrupt global supply chains, increasing inefficiencies and limiting the benefits of international trade. Overall, while tariffs might offer short-term protection for certain industries, they can have far-reaching negative impacts on both consumers and businesses, ultimately slowing down broader economic growth.
Separately, credit agency Moody's has warned that US withdrawal from international organisations could threaten the triple-A ratings of institutions like the World Bank. This comes as Trump ordered a review of US government support for intergovernmental organisations, potentially leading to withdrawal from certain United Nations agencies, with Moody's cautioning that reduced US commitment to multilateral development banks could have negative credit implications.
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