Trump Plans 25% Tariff on Steel and Aluminum
USITC, PIIE, and Tax Foundation Warn of Direct Hit to U.S. Manufacturing
Donald Trump, the U.S. president who announced a 25% tariff bomb on imported steel and aluminum, is analyzed to have caused the loss of up to 75,000 manufacturing jobs in the U.S. due to the steel tariff measures implemented during his first term. The manufacturing sectors such as construction and automotive are estimated to have experienced an average annual production decrease of $3.4 billion (approximately 4.9 trillion KRW) due to cost increases from rising steel prices. As warnings emerge that the damage to U.S. manufacturing could worsen if the steel tariff measures proceed as planned, there are also expectations that President Trump will negotiate with countries individually before implementing the steel tariffs, just as he did during his first term.
On the 10th (local time), a synthesis of reports from the U.S. International Trade Commission (USITC), the Peterson Institute for International Economics (PIIE), and the Tax Foundation revealed that while the steel and aluminum tariff measures under Trump’s first administration protected the domestic steel industry, they had negative effects on U.S. manufacturing overall. Previously, during his first term, Trump applied Section 232 of the Trade Expansion Act in March 2018, imposing a 25% tariff on steel products and a 10% tariff on aluminum products citing national security reasons.
According to the reports, after the tariff measures, from 2018 to 2021, the prices of imported steel and aluminum in the U.S. rose by 22.7% and 8%, respectively. This was a consequence of steel and aluminum imports plummeting by 24% and 31.1% due to tariff barriers. Overall domestic steel and aluminum prices increased by 2.4% and 1.6%, respectively.
This translated into damage for manufacturers using steel and aluminum as raw materials. The manufacturing sector experienced production declines due to increased cost burdens. The estimated scale of production decline from 2018 to 2021 averaged $3.4 billion annually. The construction and automotive industries, which account for 47% and 25% of U.S. steel consumption respectively, suffered the most, and profitability also worsened in the aerospace and home appliance sectors. As a result, it is estimated that up to 75,000 manufacturing jobs in the U.S., centered around industries utilizing steel and aluminum, were lost.
The steel industry benefited from protectionist effects due to the tariff measures during Trump’s first term. According to PIIE estimates, 8,700 jobs were created in the steel industry. However, the cost of creating each new job was estimated to be as high as $650,000 (approximately 940 million KRW). PIIE pointed out that while steel industry revenues increased by $2.4 billion (about 3.5 trillion KRW) in 2018 due to the tariffs, manufacturing sector costs ballooned by $5.6 billion (about 8.1 trillion KRW).
The Tax Foundation stated, "Steel and aluminum tariffs were introduced to address national security concerns but unintentionally brought negative consequences to American industry and consumers," adding, "Since tariffs act as taxes on imports and raise production costs, the Section 232 steel tariffs should be repealed for the sake of the U.S. economy and job creation."
A notable point is that President Trump aims to build even higher tariff barriers than during his first term. He announced the day before that he plans to impose a 25% tariff on all steel and aluminum products imported into the U.S. During his first term, tariffs were 25% and 10%, respectively, but this time he intends to raise the rates further. Moreover, the White House explained that this would be in addition to existing tariffs. If the steel tariff measures proceed as planned, the damage to U.S. manufacturing could be greater than during Trump’s first term.
Some express concerns that the steel tariff measures will spread damage to manufacturing, leading to job losses and consumer price increases, and predict that President Trump may negotiate with countries individually in the future. Previously, he signed an executive order on the 1st of last month to impose a 25% tariff on all imports from Canada and Mexico but abruptly postponed enforcement for a month just one day before it was to take effect.
Additionally, during his first term, after announcing steel tariff measures, President Trump negotiated with some countries including South Korea to exempt them from steel tariffs in exchange for applying quota systems that limited export volumes.
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