President Donald Trump’s administration recently raised tariffs on steel and aluminum imports to 50%, less than three months after imposing a 25% tariff on them. But like the overall Trump policy, the steel and aluminum tariffs won’t help the United States economically.
The June 3 move was a not-too-subtle rebuke to a federal court striking down Trump’s broader tariff regime, a May 29 decision by a three-judge panel at the U.S. Court of International Trade in New York. The federal panel said Trump overstepped his authority by implementing a tariff regime on dozens of countries in a bid to enliven domestic manufacturing and to slash budget deficits by generating revenue from import levies. The administration has also used the tariffs as bargaining chips for trade deals more favorable to the U.S., as well as in geopolitical negotiations.
On the heels of the federal judiciary hitting pause on the president’s ability to unilaterally enact 10% universal tariffs under the International Economic Emergency Powers Act of 1977, Trump turned his attention to the steel and aluminum sector. Under Section 232 of the Trade Expansion Act of 1962, which allows the president to bypass Congress in taxing imports on the grounds of “safeguarding national security,” Trump ramped up tariffs to 50% for both steel and aluminum imports from every nation except the United Kingdom, which will still pay the 25% rate agreed to in last month’s trade deal.
Unlike the precedented use of the IEEPA, presidents have been given a wide degree of latitude to legally justify sector-specific or nation-specific embargoes and regulations under Section 232, even if the logic behind such national security complaints remains wanting. But whatever the economic theory behind Trump’s invocation of his second stab at steel and aluminum tariffs, they will likely work as well as they did the last time he imposed Section 232 tariffs on steel — that is to say, not very well at all.
For starters, unlike Trump’s single-minded focus on China during his first-term trade war, Trump 2.0 is sparring with every country on the planet with the ostensible goal of negotiating freer and fairer trade deals, from our closest democratic allies to the Chinese Communist Party. For the purpose of the art of the deal, the threat of a universal tariff, currently at 10% but hypothetically due to rebound to the ridiculous reciprocal rates of 30% or 40% on key allies at the end of the 90-day pause in July, is a compelling one. A steel-specific tariff, by contrast, imposes minimum leverage over other nations while domestically undercutting the sectors Trump claims to want to protect: manufacturing employment.
For the steel and aluminum tariffs, the past is prologue. A year into his first term in office, Trump’s 232 investigation into steel and aluminum resulted in a 25% and 10% levy on the imports, respectively. Economists at the Federal Reserve Board found that, whatever negligible protective effects the tariffs posited, they were “more than offset by the negative effects associated with rising input costs.” The Fed found the tariffs were associated with an overall 2.7% reduction in manufacturing employment.
The culprit? The simple fact is that far more workers are employed in positions that use steel as an input than those who manufacture steel as an output. Economists Kadee Russ and Lydia Cox found that despite an increase of 1,000 new steel manufacturing jobs, sectors that used steel and aluminum as inputs lost 75,000 in the year and a half after the tariffs went into effect. Because the net cost to consumers was $5.6 billion in tariffs charged, the Peterson Institute for International Economics estimated that each new steel job created cost an extra $650,000.
Ironically enough, the #Resistance that replaced Trump in 2021 largely kept his tariff regime in place, with piecemeal exemptions for the U.K., Japan, and the European Union. Then-President Joe Biden fought the World Trade Organization to keep Trump’s steel tariffs in place, finalizing rates for both steel and aluminum at 25% in 2024.
The results were what economists expected. When the 2018 steel and aluminum tariffs went into effect for nearly all countries except a handful of exemptions, the Bureau of Labor Statistics tallied more than 77,000 people working in the structural iron and steel sector. By May 2024, that fell below 64,000 jobs. Meanwhile, the overall manufacturing employment is slightly below 2019 levels despite a precipitous increase in the working-age population since then. Steel prices are up 62%, more than twice as much as overall inflation in that time.
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While Trump may have gotten away with his first-term tariffs given a stellar economic performance before COVID-19, there’s evidence that, despite ample progress on inflation thus far, his second-term tariffs are pushing producers to the brink. The New York Federal Reserve found that although businesses were able to largely eat the cost of tariffs in April, by early May, “most businesses passed on at least some of the higher tariffs to their customers, with nearly a third of manufacturers and about 45% of service firms fully passing along all tariff-induced cost increases by raising their prices.”
Trump may feel justified in pushing his luck for a negotiation strategy, but doubling steel and aluminum tariffs is a poor hand to play. He’d be wise to return to the “one big, beautiful bill” and try a carrot, not a stick, in the form of a corporate tax cut for those producers who onshore manufacturing in America.