Trump to raise tariffs on derivative steel, aluminium imports

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US President Donald Trump

Washington,  US President Donald Trump has signed a proclamation that will raise tariffs on derivative steel and aluminium imports to cover nails, staples and other downstream products, while studies show that tariffs have hurt the American manufacturing sector and the overall economy.

“I have concluded that it is necessary and appropriate in light of our national security interests to adjust the tariffs imposed by previous proclamations to apply to the derivatives of aluminium articles and steel articles,” Xinhua news agency reported on Sunday quoting Trump as saying in the proclamation released Friday night.

“Foreign producers of these derivative articles have increased shipments of such articles to the US to circumvent,” the existing duties on steel and aluminium imports, threatening to undermine the administration’s actions to address the national security risks, said the President.

The Trump administration will raise tariffs on imports of derivative steel products by an additional 25 per cent and increases tariffs on imported derivative aluminium products by an additional 10 per cent starting February 8, according to the proclamation.

Argentina, Australia, Brazil, Canada, Mexico and South Korea are exempt from the additional tariffs on derivative steel products, while Argentina, Australia, Canada and Mexico are exempt from the additional duties on derivative aluminium products, the proclamation said.

Amid strong opposition, the Trump administration unilaterally imposed a 25 per cent tariff on steel imports and 10 per cent tariff on aluminium imports in 2018 citing national security concerns, defined under Section 232 of the Trade Expansion Act of 1962.

Many economists and business leaders have warned that the Section 232 tariffs on steel and aluminium imports would harm the US economy overall, including workers in other manufacturing sectors that use steel and aluminium.

Higher costs from steel and aluminium tariffs, quotas and associated retaliation by trading partners would reduce US GDP by 0.2 per cent annually, according to a research by Trade Partnership Worldwide, LLC, an international trade and economic consulting firm.

The research also showed that 16 jobs would be lost in other US sectors for every job gained in the steel or aluminium sector, and every US state will experience a net loss of jobs due to the tariffs.

While the Trump administration has relied on tariffs to boost domestic production and revive the manufacturing sector, a recent study from the US Federal Reserve suggests that these efforts have backfired.

“We find that tariff increases enacted in 2018 are associated with relative reductions in manufacturing employment and relative increases in producer prices,” Fed economists Aaron Flaaen and Justin Pierce wrote in the study released last month.

For manufacturing employment, a small boost from the import protection effect of tariffs is more than offset by larger drags from the effects of rising input costs and retaliatory tariffs, the study showed.