After weeks of political whiplash, President Trump has officially increased tariffs on all steel and aluminum imports to 25% which is already prompting promises of retaliation from the EU, Canada and other long-time allies. The tough talk and heavy hand of tariffs are becoming normalized in the White House but are certain to produced mixed results at best and recent history provides an important economic lesson.
The Administration’s stated goals, “restoring fairness to steel and aluminum markets” echo the tariffs that were introduced during the first Trump Administration in March 2018: 25 percent for steel and 10 percent for aluminum imports. The President used Section 232 of the Trade Expansion Act, claiming the effects of steel and aluminum imports on US national security. While the industry celebrated the new protections, downstream manufacturers, heavy users of these metals, pushed back, concerned over the impact of cost increases on their production. In fact, in 2020, the Bureau of Industry and Security received 142,582 requests for exemption from the steel tariff and there were 11,249 requests for exemption from the aluminum tariff.
Ultimately, experts had enough time to analyze the impact of these tariffs. One study found that the price of steel products increased by 9 percent. In another study it was shown that, while these tariffs created 1,000 additional jobs in steel industry, they reduced employment in other industries by 75,000. And according to the same experts, these job losses did not factor in the impact of retaliatory tariffs’ on American businesses and jobs.
We are at it again in 2025 and this time President Trump wants to intensify his steel and aluminum tariffs by minimizing the country specific exemptions, subjecting both products to 25 percent tariffs starting March 12. In a recent opinion piece, his advisor Peter Navarro dubs the policy as “It’s a fight for the survival of an essential American industry.” But one might ask how about other industries?
While we usually discuss steel and aluminum as if they are only two products, in reality, there are a number of different types of steel and aluminum, as well as derivative products, that will be subject to these tariffs. For example, steel screws, bolts and nuts, tubes and pipe fittings are just a few examples of the long list of products listed in the tariff announcements. Not all types or derivatives of steel and aluminum are produced in the U.S.
The potential cost increases also will hit the energy industry and some of the manufacturing industries that the President wants to grow. For example, according to a 2023 U.S. International Trade Commission study, the 2018 steel and aluminum tariffs caused U.S. oil and gas extraction industry to lose $586 million in production between 2018 and 2021. The impact on electrical equipment manufacturing, which also includes power, distribution and specialty transformers, was worse: the loss was $686 million and no one needs to reiterate how important is to build our electricity infrastructure for our increasing electricity demand from the tech industry and given the national energy emergency the first executive order highlighted.
And there are foreign investors who sent significant amounts of capital to the U.S. trusting its stable and certain tax and regulatory policy environment. These capital-heavy investments are planned for longer timelines than Presidential elections and rely on avoiding wild pendulum swings from one policy extreme to another. For example, at the end of 2023, the capital heavy auto industry had a foreign direct investmentposition of $195.6 billion in the U.S. These majority foreign owned firms helped expand U.S. exports by 63.1 billion in 2021 and supported more than half a million jobs. Now, the U.S. intends to raise the cost for these producers, flashing warning signs for any potential newcomers.
But how can the U.S. prevent all these downstream impacts and at the same time help the steel and aluminum industry? With the current actions, hope for international cooperation is dim. But creating an economic environment that could significantly increase the demand for domestic material can be helpful. Building and upgrading the nation’s infrastructure, ranging from improving the electric grid to expanding pipelines, continuing with business-friendly tax code that will attract investment in the economy, and working on regulations to help all types of businesses will increase the demand overall, no doubt helping also the steel and aluminum industries. Rather than relying on blunt-force tariffs that threaten American industries and investment, a smarter approach would be fostering economic growth, strengthening infrastructure, and ensuring policies that benefit all sectors—not just a select few.
