The decision by U.S. President Donald Trump to impose a 25% tariff on imported steel and aluminum products has raised concerns in the market about escalating trade conflicts and increasing inflation. This move has pushed gold prices to historic highs and put pressure on Chinese steel companies’ stock prices. However, some countries still hope to negotiate with the United States.
According to Reuters, as the world’s largest steel producer, China is not a major supplier of steel to the U.S. However, Trump believes that China’s steel exports indirectly lead other countries to increase exports to the United States. Furthermore, he stated that the growth in U.S. imports “proves” that some Chinese steel may enter the U.S. through third countries or after processing.
On Monday, Trump raised steel and aluminum tariffs to 25%, causing U.S. steel stock prices to rise. However, he also mentioned considering exemptions for Australia and emphasized that the new measures would be effective on March 4th.
George Lagarias, Chief Economist at Forvis Mazars, stated, “The market perceives Trump’s tariff policy as a negotiation strategy, so it is waiting to see its actual impact.” Gold prices surged due to safe-haven demand, with spot gold rising 0.3% to $2,916.37 per ounce in London, reaching as high as $2,942.70 intra-day.
In the stock market, there were minimal changes in European markets, with the pan-European STOXX 600 index slightly down by 0.1%, while the FTSE and GDAXI in London and Frankfurt set new highs. Chinese markets saw a decline, with steel company stock prices falling between 0.145% and 2.62%, and iron ore futures reversing gains amid concerns about the impact of tariffs outweighing supply disruptions from Australian weather factors.
Additionally, retaliatory tariffs on U.S. energy and some commodities from Beijing took effect on Monday. The Hang Seng Index in Hong Kong reached a four-month high in early trading but later fell by 1.1%. Over the past month, the index has risen over 12% due to the AI and chip stock frenzy.
While Trump had initially stated that there would be no exceptions to tariffs, after a call with Australian Prime Minister Anthony Albanese, he agreed to consider exemptions for Australia, noting that Australia is one of the “few” countries with a trade deficit with the U.S. Albanese mentioned that Australia accounts for 1% of U.S. steel imports and 2% of aluminum imports.
Based on data from the U.S. government and the American Iron and Steel Institute, Canada, Brazil, Mexico, South Korea, and Vietnam are the major steel importers to the United States, with Canada being the largest aluminum importer.
Cheong In-kyo, South Korea’s Minister of Trade, Industry, and Energy, stated that the government would “actively consider” negotiating tariff issues with the U.S. and warned that tariffs might lower U.S. steel demand, affecting exporters’ profitability. In 2024, South Korea had a trade surplus of $55.7 billion with the United States, a 25.4% increase from the previous year.
Do Ngoc Hung, Vietnam’s Trade Commissioner in the U.S., pointed out that the U.S.’s actions could prompt countries to enhance trade protection measures, posing challenges for Vietnamese steel exporters. “Vietnamese companies still have export opportunities as U.S. manufacturers currently cannot fully meet domestic demand,” he said. “Exporters should assess markets and expand agreements with countries that have Free Trade Agreements (FTAs) with Vietnam.”
The American Primary Aluminum Association (APAA) expressed support for Trump’s tariff measures. APAA Chairman Mark Duffy stated, “Today is a great day for the American aluminum industry. President Trump’s actions will protect thousands of American workers and families, curbing unfair trade practices.”
However, U.S. aluminum-consuming industries urged Trump to consider the long-term impact of tariffs on the overall metal industry. Brian Hesse, CEO of New York’s PerenniAL company, stated, “The U.S. cannot produce enough aluminum to meet half of domestic demand, and price increases from tariffs will be passed on to consumers.”
Century Aluminum, a U.S. aluminum company, “strongly supports” Trump’s tariff measures. The company’s CEO, Jesse Gary, said, “President Trump’s decisive actions will protect national security and ensure fair competition for American aluminum industry workers.”
In the foreign exchange market, the U.S. dollar index remained stable. Investors were focused on Federal Reserve Chair Jerome Powell’s semi-annual report to Congress on Tuesday, especially his assessment of tariffs and inflation.
During his testimony to the Senate Banking Committee, Powell stated that the central bank “does not need to rush” to resume rate cuts and emphasized that officials significantly reduced rates last year with the economy still robust. “Given our current more accommodative stance and the robustness of the economy, we do not need to rush to adjust our policy stance.”
Previously, Elisabet Kopelman, a U.S. economist at SEB Bank, noted that Powell’s comments after the January meeting indicated no immediate plans for further rate cuts, suggesting he might maintain that stance.
The USD remained at 151.93 against the JPY, while the EUR/USD was at 1.0318. Due to Trump’s tariffs, the Canadian dollar and Mexican peso slightly decreased. The Chinese yuan fell below the 7.3 level against the USD, trading at 7.3042. The Australian dollar remained steady at 0.6278.
The yield on the 10-year U.S. Treasury bond rose to 4.519%. The market was concerned about Trump questioning U.S. government debt data, with some analysts speculating that he might be referring to internal debt holders or accounting treatments of national debt.
“Markets are still observing the specific impacts,” said Mark Elworthy, Head of Fixed Income and Commodities Trading at the Bank of America Australia branch. “This issue may further develop in the coming days.”
In the energy market, U.S. crude oil prices rose by 1.1% to $73.08 per barrel, while Brent crude rose by 1.1% to $76.71 per barrel. Concerns about supply risks from Russia and Iran drove the oil prices upwards.