(Bloomberg) -- President Donald Trump said the U.S. would slap tariffs on steel and aluminum imports to protect national security, a major escalation of his hawkish trade agenda that could hit producers from Europe to Asia and spur global retaliation.
Trump said he would impose tariffs of 25 percent on imported steel and 10 percent on aluminum for “a long period of time,” and he expected to sign a formal order next week. The president didn’t elaborate on the details of the planned action, including whether any products or countries would be exempted.
“We’ll be imposing tariffs on steel imports and tariffs on aluminum imports,” Trump told metals industry executives Thursday at the White House. “Some time next week we’ll be signing it in. And you’re going to have protection for the first time in a long time.”
The S&P 500 Index slumped to session lows, U.S. stocks for companies that consume the metals like Ford Motor (NYSE:F) Co. fell, and Treasuries climbed as investors reacted to the news, while shares of U.S. steel and aluminum producers jumped. It was a different story for steel producers in South Korea and Japan, which were getting hammered in early Friday trading.
Trump had been considering a range of options to curb imports of steel and aluminum, after the Commerce Department concluded that shipments of the two commodities hurt U.S. national security. That reasoning has irked allies, with Japan’s Trade Minister Hiroshige Seko on Friday pushing back against that view.
“Steel and aluminum imports from Japan, which is an ally, do not affect U.S. national security at all,” Seko told reporters in Tokyo Friday. “I would like to convey that to the U.S. when I have an opportunity.”
Canada -- the biggest foreign supplier of steel to the U.S. -- said the measures were unacceptable while the European Union vowed to “react firmly” with World Trade Organization-compliant countermeasures in the next few days.
The punitive measures would level the unfair playing field that has persisted for years and make it easier for American companies to expand and hire workers, Trump said.
Read more: How steel became cast as a security issue
Trump’s statement Thursday followed hours of confusion. Staffers in the White House scrambled to explain what was happening with the expected tariff announcement, ducking in and out of offices in the West Wing as they sought information about the president’s plans.
On Wednesday night, Trump was set to announce stiff tariffs on steel and aluminum, and industry CEOs were sent a last-minute invitation to the White House for the unveiling. Early Thursday, White House aides confirmed the announcement was coming. But later in the morning, they said it was postponed.
Listening Session
Stocks including AK Steel Holding Corp., U.S. Steel Corp. and Century Aluminum Co. jumped on anticipation of the tariffs announcement, then retreated following mid-morning reports that no announcement was expected Thursday. Trump’s statement pushed them back up again.
Amid the tumult, the tariff event was re-billed as a “listening session” with chief executives, including ArcelorMittal USA’s John Brett, Nucor Corp (NYSE:NUE).’s John Ferriola and Century Aluminum Co.’s Mike Bless. At that meeting, which was opened up to the press, he announced the tariffs.
Stocks Up
At 4:30 p.m. in New York, Century was up 7.5 percent and AK Steel climbed 9.5 percent. Pittsburgh-based U.S. Steel advanced 5.8 percent and Charlotte, North Carolina-based Nucor Corp., the largest American producer, advanced 3.3 percent. Aluminum prices rose in London, while the premium to deliver metal to the U.S. Midwest jumped the most since at least 2013.
Companies from beer brewer MillerCoors to candymaker Hershey Co., which use aluminum for manufacturing and packaging, said operations would be hurt by the tariffs.
“We buy as much domestic can sheet aluminum as is available, however, there simply isn’t enough supply to satisfy the demands of American beverage makers like us,” MillerCoors said in a tweet. “American workers and American consumers will suffer as a result of this misguided tariff.”
Behind the Scenes
The day’s drama mirrored prior behind-the-scenes maneuvering. Trump has previously made up his mind on steel and aluminum tariffs, only to have staff argue him into delaying, two people familiar with the matter said. Despite more warring Thursday, Trump dug in.
“Going to get the papers done now?” Trump asked Wilbur Ross as reporters left the meeting with industry executives.
“Yes,” Ross said.
A U.S. move on tariffs may provoke retaliation from China, the world’s biggest steel and aluminum producer. China has already launched a probe into U.S. imports of sorghum, and is studying whether to restrict shipments of U.S. soybeans -- targets that could hurt Trump’s support in some farming states. While China accounts for just a fraction of U.S. imports of the metals, it’s accused of flooding the global market and dragging down prices.
China Talks
Trump announced the tariffs as Chinese President Xi Jinping’s top economic adviser, Liu He, is scheduled to meet Trump’s senior economic team in Washington -- including White House economic adviser Gary Cohn, U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin.
What Our Economists Say... “China’s total exports of steel and aluminum are equal to about 0.5% of GDP, most of that from steel,” said Bloomberg’s Chief Asia Economist Tom Orlik. “Relative to fears from Trump’s campaign trail rhetoric, in which he threatened an across-the-board 45% tariff on all imports from China, these measures are extremely limited.” |
Foreign government officials have traveled to Washington in recent days to voice their concern about tariffs. Mexican Economy Minister Ildefonso Guajardo was said to warn the administration about his country’s plans for retaliatory measures. Trump is also under pressure from members of his own Republican Party to tread lightly to avoid triggering global retaliation and amid concerns of higher prices for consumer goods.
However, American steel producers and workers have called on Trump to defend their industry as it grapples with the effects of overcapacity in China.
Last April, the president ordered the Commerce Department to study the impact of steel and aluminum imports on national security under the seldom-used section 232 of the 1962 Trade Expansion Act. The department submitted its final reports to the president in January.
(Updates with Japanese, South Korean steel producer shares in fourth paragraph.)