Trump’s steel and aluminum tariffs take effect, the real target is to block Chinese products.

On March 12th, the United States President Donald Trump’s policy to impose a 25% tariff on all steel and aluminum imports to the United States took effect. While on the surface, this policy appears to harm many of America’s allies, such as Canada, Mexico, and the European Union, its true essence is to block China’s communist regime from exporting steel and aluminum products at low prices due to overcapacity. It is anticipated that Trump and his allies may ease tensions through negotiations, and the real impact of the tariffs will be felt by China.

Trump’s steel and aluminum tariff policy aims to provide a fair competitive environment for American manufacturing, correct trade imbalances, and revitalize domestic industries. This could potentially lead to a global reconfiguration of trade and supply chains, especially attracting numerous manufacturing industries to invest in the United States.

During his first term, Trump imposed tariffs on steel and aluminum. In 2018, to protect American steel manufacturers from unfair foreign competition, he imposed a 25% tariff on foreign steel and a 10% tariff on aluminum, citing the 1962 trade law to declare low-priced foreign steel and aluminum imports a threat to national security.

Subsequently, Trump exempted major steel-producing countries such as South Korea, Australia, and Brazil from tariffs in exchange for enforcing quotas on steel and aluminum exports to the United States. However, Trump retained tariffs on China, indicating that the tariff war during Trump 1.0 mainly targeted China.

According to the Associated Press, China is widely seen as the root cause of problems in the world steel industry. Subsidized heavily in Beijing, China’s overcapacity in steel has led to a flood of steel into the world markets, driving down prices and harming steel manufacturers in the United States and elsewhere.

By the time of Trump’s first presidential campaign in 2016, once-prosperous steel regions in the American Midwest had turned into desolate “Rust Belts.” Dissatisfaction with this situation among voters propelled Trump to his first victory.

Although Trump’s 2018 steel and aluminum tariffs were weakened by various exemptions, they still benefited American metal producers, leading to a revival of the American steel industry. Over the past six years, the capacity of the U.S. steel industry has increased by about one-fifth.

During a business roundtable meeting on Tuesday, Trump told executives that raising tariff rates would effectively bring back businesses and investments in American factories.

He said at the meeting, “The higher the tariffs, the more likely they are to come and build their factories. The biggest victory is they come into our country and create jobs. That’s a bigger victory than the tariffs themselves, but the tariffs will bring in a lot of money for this country.”

The White House noted that automakers such as Volvo, Volkswagen, and Honda were exploring “increasing their footprint in the United States.”

CNN reported that China is currently the world’s largest steel producer. Although direct imports of steel from China to the United States are minimal, Chinese steel does enter the U.S. market through “secondary channels.” Some are purchased by other countries and sold to the United States, while others have their origin labels intentionally mislabeled and then resold to the U.S. through various channels.

According to data from the U.S. Department of Commerce, the United States imported a total of $31.3 billion worth of steel and iron, and $27.4 billion worth of aluminum last year. Canada was the largest source of steel and aluminum exports to the U.S. last year, with $7.6 billion worth of steel and $11.4 billion worth of aluminum imported.

Based on last year’s trade data, other major sources of steel exports to the United States include Brazil, Mexico, and South Korea, while other major sources of aluminum exports to the United States are China, Mexico, and the United Arab Emirates.

In September of last year, during the intense stage of the U.S. election, then-President Biden raised tariffs on Chinese steel and aluminum products from 7.5% to 25%.

However, the Biden administration still allowed exemptions from tariffs for U.S. allies such as Canada, Mexico, Japan, and South Korea.

At the beginning of Trump’s second term, he canceled all exemptions for the 2018 steel and aluminum tariffs, imposing a unified 25% tariff on all countries. As a result, aluminum tariffs increased from 10% to 25%.

This move aimed to close the loophole that allowed all Chinese steel and aluminum products to enter the U.S. through “secondary channels.”

With Trump’s additional 20% tariffs on Chinese imports taking effect last week, on top of the 25% steel and aluminum tariffs, China’s total tariff on steel and aluminum products reached 45%. This makes China the only country with steel and aluminum tariffs higher than 25%.

Although Trump threatened to impose a 50% tariff on steel and aluminum from Canada on March 11, he chose to maintain a 25% tariff on Canadian steel and aluminum after Ontario suspended plans to impose surcharges on electricity exported to Michigan, Minnesota, and New York States in the U.S.

Trump plans to impose a 25% tariff on all Canadian and Mexican products next month, while keeping the tariff on Canadian energy at 10% – Trump has delayed this move twice, giving a 30-day extension each time after negotiations between the two sides.

This indicates that there is negotiating room between Trump and his allies. During the first wave of tariff battles between Trump and Canada and Mexico, Trump stated that it was not a “trade war” but a “drug war.” When Canada and Mexico were able to meet Trump’s demands by strictly preventing fentanyl from China from entering the U.S. through their borders, Trump granted them tariff exemptions or delays.

It is expected that in the latest wave of steel and aluminum tariff wars, conflicts between the EU and Canada against Trump are likely to be alleviated through negotiations.

On Wednesday (12th), the EU announced its retaliatory measures. Ursula von der Leyen, President of the European Commission, stated that due to the U.S. imposing tariffs worth $28 billion on the EU, they are taking retaliatory measures worth €26 billion (approximately $28 billion). These measures not only cover steel and aluminum products but also include textiles, household appliances, and agricultural products, which will take effect on April 1st.

Canada also announced retaliatory tariff measures later on Wednesday morning, which will take effect on Thursday (13th), including a 25% tariff on imports of Canadian goods worth $29.8 billion (approximately $20.1 billion), such as steel and aluminum products from the United States.

Trump is likely to continue using tariff wars to force global allies to the negotiation table, compelling them to reach certain agreements, such as blocking Chinese steel and aluminum products from entering the U.S. through these countries via “secondary channels,” thereby giving them tariff exemptions or delays similar to previous instances.

The Chinese Communist Party has also retaliated against Trump’s tariffs; however, there seems to be no sign of potential negotiations between China and Trump.

Currently, the Chinese economy is in distress, relying on exports to support its inadequate domestic demand. Faced with Trump’s tariff threats and global isolation, the Chinese Communist Party is likely to be the one feeling the most pain.