NEWS
01/06/2018 10:14 BST | Updated 13/07/2018 00:19 BST

Why Are People Angry About Trump’s Steel Tariffs – And What Do They Mean For Us?

Clue: It's not good.

The Trump administration has imposed tariffs on steel and aluminium from Europe, Mexico and Canada, prompting stock prices to plummet and ramping up fears of a trade war.

After the announcement, stocks for industrial companies fell as they faced the prospect of paying more for metals they use to make aircraft and machinery. 

Companies that make household items took some of the worst losses, as products including orange juice and peanut butter might be hit with European tariffs, introduced in retaliation to the move by Trump. 

The EU has already threatened to counterpunch by targeting US products, including Kentucky bourbon, blue jeans and motorcycles.

The US tariff – 25% to be imposed on imported steel and 10% on aluminium –will come into effect from Friday.

President Trump had originally imposed the tariffs in March, saying reliance on imported metals threatened national security. But he exempted Canada, Mexico and the European Union to buy time for negotiations – a delay that expired at midnight on Thursday.

What does it mean?

A tariff works by restricting imports by increasing the price of goods and services purchased from overseas, making them less attractive to consumers and therefore encouraging them to buy goods produced in their own country.

In plain terms, Trump’s tariffs will give a boost to American makers of steel and aluminium by making foreign metals more expensive. But companies in the US that use imported steel will also face higher costs as other countries impose their own tariffs in return.

This will drive up prices up for American consumers and companies – which is likely to heighten uncertainty for businesses and investors around the globe.

And as the tariffs will allow domestic steel and aluminium producers to raise prices, this will in turn squeeze companies — from car makers to can producers — that buy those metals.

PA Wire/PA Images
American makers of steel and aluminium will be boosted as the move will make foreign metals more expensive... though companies in the US that use imported steel will face higher costs

The Confederation of British Industry warned the move would “damage prosperity on both sides of the Atlantic”.

The industry body UK Steel said that, with exports to America worth half a billion dollars a year, producers in Britain would be “hit hard”.

Employees at the giant Port Talbot steelworks in Wales have described the move as “another body blow.”

Mark Turner, who works at Tata, the company that owns the Welsh steelworks, said there is a major worry that the UK steel market will become saturated if other countries subject to the charges end up “dumping” their steel into Britain, pushing prices down.

He added: “Our biggest concern is dumping. The American markets are going to be closed to everybody, there’s going to be steel that’s going to be floating around and our markets in the UK are going to be at the heart of that dumping.

“If we can’t go into the American market then there’s other markets out there we will try and get in to.”

Former trade minister Francis Maude condemned the tariffs as “stupid and counterproductive.” The Tory peer, speaking on the BBC’s Today programme, said: “The inevitable result of putting these tariffs on imports will be to increase prices on consumer goods for its own citizens.”

PA Archive/PA Images
Workers at Tata’s giant Port Talbot steelworks in Wales say the move is 'another body blow' 

What happens next?

European officials have threatened to retaliate against US products including orange juice, peanut butter, clothing, motorcycles and bourbon.

The move has also drawn fire from Canada and Mexico, as well as promises to quickly retaliate against US exports.

International Trade Secretary Liam Fox branded the 25% levy on steel “patently absurd”, signalling the UK was prepared for “tit-for-tat” action. Labour’s shadow international trade secretary Barry Gardiner said the US move risked a global trade war.

“This is protectionism, pure and simple,” said Jean-Claude Juncker, president of the European Commission.

French president Emmanuel Macron called the US decision to levy tariffs on the European Union “illegal” and a “mistake”.

supershabashnyi via Getty Images
German MEP Bernd Lange said he would like to see tariffs imposed on “symbolic” US products such as Harley-Davidson motorcycles as part of the EU countermeasures 

David O’Sullivan, the EU’s ambassador in Washington, said the retaliation will probably be announced in late June.

Mexico complained that the tariffs will “distort international trade” and said it will penalize US imports including pork, apples, grapes, cheeses and flat steel.

In Canada, Prime Minister Justin Trudeau said: “These tariffs are totally unacceptable.” Canada announced plans to slap tariffs on 12.8 billion dollars-worth (£9.65 billion) of US products, ranging from steel to yogurt and toilet paper.

“Canada is a secure supplier of aluminium and steel to the US defence industry, putting aluminium in American planes and steel in American tanks,” Mr Trudeau said.

“That Canada could be considered a national security threat to the United States is inconceivable.”

Trump had campaigned for president on a promise to crack down on trading partners that he said exploited poorly negotiated trade agreements to run up big trade surpluses with the US.

The US tariffs coincide with — and could complicate — the Trump administration’s separate fight over Beijing’s strong-arm tactics to overtake US technological supremacy.