(Bloomberg) — President Donald Trump ordered a 25% tariff on steel and aluminum imports, escalating his efforts to protect politically important US industries with levies hitting some of the country’s closest allies.

The tariffs will apply widely to all US imports of steel and aluminum, including from Canada and Mexico, the country’s top two foreign suppliers of the metals. The levies, which also include finished metal products, are meant to crack down on what administration officials said were efforts by countries like Russia and China to circumvent existing duties. 

Trump cast the effort as one which would help bolster domestic production and bring more jobs to the US, and warned that the rate on metal tariffs “may go higher.” The new rates will go into effect on March 4, a US official said.

“Essentially, we’re putting on a 25% tariff, without exception, on all aluminum and all steel, and it’s going to mean a lot of businesses are going to be opening in the United States,” Trump said Monday as he signed the measures in the Oval Office.

While the measures unveiled Monday did not include exemptions for trading partners — and US officials said they were wary of granting any leeway — Trump indicated that he may consider a break for Australia, crediting the country’s import of US-made aircraft.

After-hours movement was muted in shares of the major American steel and aluminum producers. Alcoa Corp., the largest American aluminum producer, gained about 1%, while Nucor Corp., the largest US steelmaker, rose 0.5%.

Trump’s move comes on top of new 10% tariffs on goods from China; 25% levies on Canada and Mexico that are currently paused; and his plan to slap reciprocal duties on other nations. The president also reiterated his threat to levy reciprocal tariffs against countries that have levies on US imports, saying those could be announced over the next two days. And he said the administration will be looking at levies on cars and semiconductors, as well as other potential sectors.

Escalating Tariffs

The metal tariffs the president approved Monday are the broadest-reaching action yet by Trump to confront US trade deficits and harness international commerce as a source of revenue.

Trump authorized the new tariffs under Section 232 of the Trade Expansion Act, which gives the president broad authority to impose trade restrictions on domestic security grounds. It is the same power that Trump used to levy steel and aluminum tariffs in 2018, during his first term. With his proclamations Monday, he is effectively reviving and expanding those tariffs.

The US saw a bump in manufacturing employment fueled by Trump’s tax cuts early in his last administration. But things started to change after he introduced the steel and aluminum tariffs in March 2018 and also launched a trade war against China. In 2019, the first full year after Trump’s initial steel and aluminum tariffs went into effect, the US actually lost manufacturing jobs and the broader factory sector entered a slump with industrial production falling.

A senior administration official said the new action was necessary because steel and aluminum exporters abused exceptions under the previous policy, which hurt US producers. The official detailed the moves on a call with reporters earlier Monday on condition of anonymity.

Trump’s decision to include downstream finished products is a significant move that will have broad-reaching price impacts on a massive swath of US consumers. Whereas Trump’s 2018 tariffs focused mostly on raw steelmaking and primary aluminum production, these new tariffs will include things like extrusions and slabs that are turned into value-added products needed in everything from automobiles to window frames and skyscrapers. The move would fulfill what the most extreme trade protectionists have sought for years.

Trump will also direct US Customs and Border Protection to step up oversight to prevent foreign countries from misclassifying steel products to evade tariffs, the officials said. 

The effort reprises a strategy Trump adopted during his first term, when he imposed tariffs of 25% on steel and 10% on aluminum that prompted a decline in US imports of the metals. The levies sparked retaliation from US trading partners, including the European Union, which imposed tariffs on iconic American goods, from Harley-Davidson Inc. motorcycles to Levi Strauss & Co. jeans. 

Trump ended up granting duty-free status to several major exporters, including Canada, Mexico and Brazil. Former President Joe Biden expanded those exemptions.

It’s unclear how countries might respond to Trump’s latest decision on metals, though new retaliatory Chinese levies over the 10% tariff on goods took effect on Monday. 

“Steel and aluminum tariffs on Canada, the United States’ closest ally, would be totally unjustified,” François-Philippe Champagne, Canada’s minister of Innovation, Science and Industry, said in a statement Monday night. “Canadian steel and aluminum support key industries in the US from defense, shipbuilding, energy to automotive.”

Opponents overseas say the widespread tariffs violate global trading rules and are an affront to US allies abroad. And economists warn Trump’s tariffs risk raising costs in the US for everything from groceries to gasoline — potentially stoking the very inflationary pressures the president campaigned on quelling. Administration officials counter, however, that the levies are part of a broader economic strategy — including extended tax cuts and expanded domestic energy production — that will help lower costs overall. 

The US is heavily reliant on aluminum imports to meet domestic demand, with many of those supplies coming from Canada, the United Arab Emirates and China. Net imports of aluminum reached more than 80% in 2023, according to Morgan Stanley. 

Although foreign steel represents a smaller portion of overall consumption, the aerospace, auto manufacturing and energy sectors rely on imported specialty grades. 

The move also comes before a visit from Indian Prime Minister Narendra Modi this week. India is a supplier of steel to the US and the Indian Steel Association, a lobbying group, has urged the government to take diplomatic action to secure exemptions from US trade restrictions.

Trump made reviving US steelmaking a signature aim of his agenda; it also was a potent political promise in Rust Belt states such as Ohio and Pennsylvania that have seen an erosion of industrial manufacturing jobs. While the United Steelworkers union, which is influential in such states, endorsed his general-election rival — former Vice President Kamala Harris — many local chapters backed Trump.

On Friday, Trump declared he would continue blocking a bid by Japan’s Nippon Steel Corp. to take over United States Steel Corp. — a deal that is also opposed by the steelworkers union. Instead, the president said after a meeting with Japanese Prime Minister Shigeru Ishiba that Nippon Steel might make a significant investment in the US steelmaker, allowing it to remain an American company with significant foreign backing.

. Read more on Global Economics by NDTV Profit.Trump cast the effort as one which would help bolster domestic production and bring more jobs to the US, and warned that the rate on metal tariffs “may go higher.”  Read MoreGlobal Economics, World, Bloomberg 

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