Market Wire: Trump Reignites Trade War With Renewed Steel and Aluminum Tariffs

Donald Trump has signed an executive order imposing a 25-percent tariff on all imports of aluminum and steel into the United States, threatening to unleash a round of retaliatory measures from other countries and to touch off a global trade war.

According to officials quoted by major news networks, the measure will take effect on March 4, and will contain no product exclusions or exemptions. This will, in effect, nullify a set of agreements put in place during Trump’s first term, and supersede deals made during Joe Biden’s term with Canada, Mexico, Japan, and the European Union, among others.

Major exporting countries like Canada, Australia, Mexico, and Brazil could again suffer disproportionately as the tariffs take effect, but won’t be alone in taking economic damage.

Similar efforts during the president’s first term helped a small number of US producers increase capacity, but ultimately raised costs for the far larger number of businesses that rely upon the metals in their manufacturing and assembly processes, making the American industrial base less competitive in domestic and international terms. Retaliatory measures implemented by a range of trading partners raised overall US prices—albeit against a weak demand backdrop—and subtracted from overall output levels.

Currency market reaction has been relatively muted thus far, given the extensive lead-up to this evening’s implementation, but the dollar is up against the loonie, Aussie, peso, and Brazilian real amid thin trading conditions ahead of the Asia open. We would warn against expecting these moves to be extended: given Trump’s penchant for reversing himself after symbolic victories, it would be dangerous to assume that this latest round of tariffs will remain in place at the proposed levels for very long.