Understanding Trump’s New Steel and Aluminum Tariffs
What Are Tariffs?
A tariff is a tax on goods that come from another country. When a business brings in products from outside, they have to pay this tax. As a result, the price of these goods goes up. Therefore, people may opt to buy things made in their own country. This is how local businesses grow.
There is a problem. Imported goods have to be pricey. The higher the imported product, the higher the amount to be paid by the consumer. Also, when countries charge other countries for having their goods into their territories through tariffs, those countries might complain and set their tariff too.
What Did Trump Announce?
Recently, U.S. Former President Donald Trump announced new tariffs on imports of steel and aluminum. These will raise the import price of imported steel and aluminium by 25%. In other words, any company that imports steel or aluminium from any other country to the U.S. will incur an additional tax. These will take effect on Monday.
Why Did Trump Add Extra Taxes on Steel and Aluminum?
Trump added extra taxes (tariffs) to help American workers and make the country stronger.
Helping American Workers
Many U.S. businesses buy cheaper steel and aluminium from other countries. This hurts American factories. Many factories closed. Many workers lost their jobs.
Trump wants American businesses to purchase steel and aluminium within America. Taxing imports drives businesses to get local. When demand increases, so does hiring for workers.
Staying Strong
Steel and aluminium are used to make weapons, tanks, and aeroplanes. Defence requires these metals. The risk of relying on other countries for these metals is too great.
If there is war, America needs its steel and aluminium. The production of more locally keeps the nation ready.
What Is Going to Happen to Prices?
Prices could be higher. Almost every company will require steel or aluminium to build their product.
- Car makers use steel in cars.
- Builders need it for houses and bridges.
- Soda companies require aluminium for cans.
- Aeroplane manufacturers require aluminium for their planes.
But new factory jobs create more people earning money. More jobs help families. A healthy economy helps everyone.
Trump’s plan is a roll of the dice. If it pays off, America wins.
How Will Other Countries React?
Other countries which export steel and aluminium to the U.S. may not be too pleased about these tariffs. They can retaliate with their tariffs on American products. For example:
- If the U.S. imposes a tax on the importation of steel from Canada, then Canada can impose a tax on imported American-made cars.
- If China cannot easily sell its steel to the U.S., it may raise tariffs on such U.S. agricultural products as soybeans.
This kind of tit-for-tat retaliation is known as a trade war.
The bad side of the trade war is that it increases the prices of everything and decelerates the economic growth rate. The firms dealing in exports to other countries might lose customers because of these tariffs. It might cause a loss of employment opportunities for various industries dealing with international trade.
Who Gains from These Tariffs?
Help the most: it is the American steel and aluminium sectors, benefiting from it. In case foreign steel and aluminium become too pricey, companies operating in America are likely to gain a better chance of selling their own. This might lead to more jobs within the said industries, which is what Trump hopes to attain.
Another entity which will benefit is the U.S. government. The government will raise more revenue from these extra taxes because companies will have to pay more money to import metals. This money can then be used on public services such as building roads, improving schools, and health services.
Who Will Be Hurt by These Tariffs?
- Companies That Use Steel and Aluminum
Companies that manufacture cars, aeroplanes, canned food, and construction materials will have to pay more for raw materials. This may increase the prices of the products for consumers and lead to job losses if companies cannot absorb the costs.
- Consumers
If manufacturers pay more for steel and aluminium, they will charge more. Therefore, people who use cars, appliances, or soda cans could end up paying more.
- Other Countries
Lost business to some other countries exporting steel and aluminium to the U.S. They, in turn, can tax American goods and may cause a trade war.
- Export Goods in America
The American companies selling their products in other countries may lose sales. This would cause job losses in export-dependent industries because of other countries imposing tariffs.
What Experts Said Regarding This?
Actually, experts within the business and economics fraternity expressing fear over the imposition of such tariffs have sounded many voices. On one hand, they are seen to fear the need to protect American steel and aluminium industries might be overridden in favour of being more damaging. For example:
- Higher prices on products.
- Lost jobs in businesses that consume such metals.
- Trade wars with nations.
Others argue that the tariffs are necessary to rebuild American industry and reduce dependence on foreign materials. They believe that short-term difficulties are worth it for long-term benefits, such as more jobs in steel and aluminium production.
What Happens Next?
The next few weeks will be critical in determining how these tariffs play out. Other countries may impose their tariffs on American goods, and the start of a trade war is a possibility. This could cause further economic disruption.
Consequently, the American manufacturers employing either steel or aluminium will also adapt to that fact. Higher costs would then persuade them to plead to the Government to either reverse or even seek to exempt particular industrial sectors.
Would you protect your country’s local industries through tariffs, or keep free trade flowing and allow consumers to buy as cheaply as possible? That’s one of the biggest debates in economics today.
