The stock markets have loved most of President Trump’s economic agenda, but not his latest step — imposing double-digit tariffs on steel and aluminum imports.
The three major indexes tumbled Thursday, with the blue-chip Dow Jones Industrial Average sliding as much as 586 points, after Trump outlined a plan for the U.S. to charge duties of 25 percent on overseas steel and 10 percent on overseas aluminum, reflecting confusion about which countries’ exports might be affected, the potential for higher costs to manufacturers who use the raw materials and early cross-fire in what may become a trade war.
The Dow’s decline of 1.7 percent was led by Boeing, Caterpillar, and United Technologies, companies that rely heavily on metals to build products from commercial and military aircraft to construction equipment and jet engines. The S&P 500 and the Nasdaq each dropped 1.3 percent.
The drops curbed the indexes’ overall gains since Trump’s 2016 election to 34 percent for the Dow, 25 percent for the S&P 500 and 38 percent for the Nasdaq.
“The tariffs could reduce trade volumes, and higher prices could restrain consumer and business spending,” Michael Gapen, an economist with British lender Barclays, said in a note to clients.
Trump’s decision, announced in a meeting with U.S. Steel Chief Executive Officer David Burritt and Nucor CEO John Ferriola, made good on a campaign promise to protect U.S. companies chafing under what the president described as unfair trade practices. The steel producers’ stocks surged, climbing 5.8 percent and 3.3 percent, respectively.
“We are not protectionists,” Burritt said during the meeting. “We want a level playing field. It’s for our employees; to support our customers. And when we get this right, it will be great for the United States of America. We have to get this done.”
The tariffs, which the president said would be imposed as soon as next week, followed a report by the Commerce Department that found U.S. steel imports were nearly four times as large as exports and that China produces almost as much as steel in a month as the U.S. does in an entire year. Ten steel furnaces in the U.S. have closed since the turn of the century, and employment in the industry has fallen 35 percent since 1998.
The situation constitutes a “threat to national security” under the Trade Expansion Act, the department wrote, justifying a tariff of at least 24 percent on steel imports from all countries or one of 53 percent on select nations including China.
“People have no idea how badly our country has been treated by other countries, by people representing us that didn’t have a clue,” Trump said. “Or if they did, then they should be ashamed of themselves because they’ve destroyed the steel industry, they’ve destroyed the aluminum industry, and other industries.”
The president’s decision drew a swift, and in some cases, furious response from members of Congress, including Republicans.
“Tariffs on steel and aluminum are a tax hike the American people don’t need & can’t afford,” Sen. Orrin Hatch of Utah wrote on social media site Twitter. “I encourage the president to carefully consider all of the implications of raising the cost of steel and aluminum on American manufacturers and consumers.”
Trump didn’t specify to which countries the tariff might be applied, and White House Press Secretary Sarah Sanders said the president was more concerned about protecting American workers than any repercussions from abroad. She declined to provide further details on the plans.
Canada, a U.S. ally that buys more American steel than other country, would respond in kind to any tariffs on its own exports to the U.S., said Chrystia Freeland, the foreign affairs minister for Justin Trudeau’s government.
“Any restrictions would harm workers, the industry and manufacturers on both sides of the border,” she said in a statement. “The steel and aluminum industry is highly integrated and supports critical North American manufacturing supply chains. The Canadian government will continue to make this point directly with the American administration.”
Indeed, Trump’s decision appears designed solely to protect the U.S. steel industry rather than address any national security concern, said European Commission President Jean-Claude Junker. The U.S. defense secretary has said publicly that the country’s military needs no more than 3 percent of U.S. production and is able to meet that demand.
“The European Union has been a close security ally of the U.S. for decades,” Junker said. “We will not sit idly while our industry is hit with unfair measures that put thousands of European jobs at risk. I had the occasion to say that the European Union would react adequately, and that’s what we will do.
