Update III: After the White House said earlier that today’s meeting would be a “listening” meeting, President Trump has taken investors by surprise by announcing that he will impose the long-rumored aluminum and steel sanctions next week.
As expected, Trump said he would impose a 25% tariff on steel imports, and a 10% tariff for aluminum. Meanwhile, here are the initial details as they trickle in:
- TRUMP: STEEL, ALUMINUM WORKERS HAVEN’T BEEN REPRESENTED
- U.S. STEEL’S BURRITT TELLS TRUMP COS. NEED LEVEL PLAYING FIELD
- TRUMP SAYS WILL REBUILD U.S. STEEL AND ALUMINUM INDUSTRIES: RTRS
- TRUMP, IN MEETING W/ STEEL COS., PRAISES SOLAR TARIFFS HE DID
- TRUMP SAYS U.S. WILL INSTITUTE TARIFFS NEXT WEEK
- TRUMP AT STEEL MEETING SAYS NEXT WEEK WILL SIGN SOMETHING
- TRUMP SAYS 25% TARIFFS FOR STEEL
- TRUMP SAYS 10% TARIFF FOR ALUMINUM
“Some time next week we’ll be signing it,” Trump said during meeting with steel and aluminum executives at White House. “And you’re going to have protection for the first time in a long time”
Before making the announcement, Trump praised his recent tariffs on solar cells and washing machines, and said they were an example of how tariffs can lead to additional U.S. investment in sectors
Metals stocks such as AK Steel, U.S. Steel, Commercial Metals and Century Aluminum rose to new session highs after Trump’s midday comments. At the same time, the Canadian dollar fell to a fresh 2018 low at 1.2879 before paring its decline slightly; steel and aluminum tariffs remind of the trade tensions between the two countries amid Nafta negotiations.
And the market is not happy…
… perhaps because it is waiting for Emperor Xi to give the sell order in retaliation.
* * *
Update II: Newswires are reporting that Trump’s tariff announcement could come as early as 11 am ET.
* * *
Update: In yet another sign that the tariffs could be unveiled as soon as today, Trump tweeted Thursday morning that “our steel and aluminum industries (and many others) have been decimated by decades of unfair trade and bad policy with countries around the world…We must not let our country, companies and workers be taken advantage of…”
Our Steel and Aluminum industries (and many others) have been decimated by decades of unfair trade and bad policy with countries from around the world. We must not let our country, companies and workers be taken advantage of any longer. We want free, fair and SMART TRADE!
— Donald J. Trump (@realDonaldTrump) March 1, 2018
Meanwhile, Axios published a study showing voters in swing states largely back Trump’s protectionist trade policies, with about half of the voters surveyed saying they’d be willing to pay more for cars if it helped the US steel and automotive industries.
* * *
Ignoring threats of a WTO challenge by the European Union and other potentially harmful countermeasures by China, President Trump is reportedly preparing to impose stiff tariffs on steel and aluminum on Thursday, according to Bloomberg.
Trump has abruptly summoned steel and aluminum executives to the White House – telling them he could announce the tariffs at the meeting, the Wall Street Journal adds.
Last week, media reports said Trump was leaning toward the stiffest trade protections from a bevy of options presented to him by the Commerce Department two weeks ago. These include a tariffs of 25 percent on steel and 10 percent on aluminum from all countries.
However, other sources told WSJ that a final decision on tariffs had not yet been made, and that the meeting could just be an opportunity to consider alternatives.
In its initial study, the Commerce Department and other agencies concluded that imports of cheap steel and aluminum harm US national security and military needs. While Trump is said to favor the broadest measures, Defense Secretary James Mattis has suggested that exemptions could be made. Commerce Secretary Wilbur Ross, a longtime steel executive, has also pushed for the toughest sanctions.
The White House ordered the Commerce Department back in April to look into these issues under the seldom-used section 232 of the 1962 Trade Expansion Act.
Both BBG and WSJ pointed out that tariffs could elicit protests and retaliations from some of the US’s biggest trading partners. The timing of the announcement could also be interpreted as an insult to China. Liu He, President Xi Jinping’s top economic advisor who’s widely believed to be in line to become China’s next financial superregulator as well as head of the PBOC, is visiting Washington this week.
Contrary to the outraged reactions from US trade partners and some pro-free trade economists, UBS’ chief economist Paul Donovan suggested that a 25% tariff on steel and 10% tariff on aluminum wouldn’t have much of an impact on consumers, who could see prices of goods from beer cans to cars move marginally higher. Indeed, the pass-through impact felt by consumers from Trump’s tariffs on solar panels and washing machines would probably be more intense.
The real risk, UBS says, is to markets, which – if history is any guide – could pitch a fit as protectionist rumblings out of the Trump administrations have often harmed stocks and the dollar. Reports late last night that Trump might unveil the sanctions today sent Asian steel stocks lower.
One economist who spoke with Bloomberg said Trump’s tariffs likely wouldn’t have a major impact on global trade on their own – the danger, he said, lies in whether the affected countries (i.e. China, Mexico and Canada) choose to retaliate. China in particular has been accused of flooding the global market with cheap steel to undermine foreign producers.
Chinese bureaucrats are already threatening retaliation.
“The United States has over-used trade remedies and it will impact employment in the U.S. and the interests of U.S. consumers,” Chinese Foreign Ministry spokeswoman Hua Chunying said. “China will take proper measures to safeguard its rights and interests.”
European officials have argued it doesn’t make sense to penalize NATO members in the name of national security.
Trump’s protectionist push comes as free-trade Republicans pressure him to soften the crackdown. However, the decision will likely go over well in Pennsylvania and Ohio – two rust belt swing states that Trump needs to keep in his corner if he wants to win reelection in 2020.
Imposing these tariffs could also complicate the renegotiation of the North American Free Trade Agreement. Canada and the US are already engaged in mini-trade spats over the Trump administration’s decision to slap a massive 300% tariff on C-Series jets produced by Canadian aerospace company Bombardier.
Ironically, Trump’s unveiling of the new tariffs would follow a surprising statement made by Treasury Secretary Steve Mnuchin earlier this week that the president is open to rejoining the Trans-Pacific Partnership – that is, if he could secure a good enough deal.
Trump still prefers bilateral trade agreements over group accords, Mnuchin said.
Any announcement on tariffs likely wouldn’t come until late Thursday, after Trump’s meeting with steel and aluminum executives has concluded.