Why Trump’s Tariffs Will Push Up U.S. Steel Prices

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Luke Vargas: The EU hits back as U.S. Steel and aluminum tariffs kick in. We’ll look at how President Trump’s latest trade moves will impact the global metals market. Plus, Ireland’s tariff fears threaten to overshadow St. Patrick’s Day festivities at the White House, and voters in Greenland slow-walk independence as Washington sizes up the territory’s minerals.

Sune Rasmussen: So if President Trump was hoping for an opening for further American influence, that has been fairly closed off with this election.

Luke Vargas: It’s Wednesday, March 12th. I’m Luke Vargas for the Wall Street Journal, and here is the AM Edition of What’s News, the top headlines and business stories moving your world today. 25% U.S. tariffs on all steel and aluminum imports went into effect at midnight. The measures bear similarity to 25% steel and 10% aluminum tariffs that President Trump embraced in his first term, and aims to address what Trump and his team say is an unfair global steel trade in which foreign government subsidies and other trade barriers allow countries to sell steel to American customers cheaper than U.S. made metals. So what effect will the new tariffs have on America’s trading partners and its domestic manufacturers? Nicole Voigt is a managing director at Boston Consulting Group and the firm’s global metals co-lead. Nicole, what does this U.S. action mean for steel producers around the world?

Nicole Voigt: Yeah, basically the whole world is watching that. I mean, to get some facts and figures here. I mean, the U.S., I mean, let’s stick with steel, has a demand of 90 million tons roughly and imported 25 million tons. And now with the Trump legislation, everything will be under tariffs. And so what is the impact on that? And to be honest, short term, the U.S. will most likely be impacted because you cannot change that quickly your production setup then to produce everything locally. And of course there’s a secondary effect with we getting rid of the exemptions or the country exemptions and the company exemptions, we have now a level playing field for all the importers. So you have not an advantage anymore if you had quotas in the past. Suddenly everybody needs to compete again on landed cost U.S., and this is why everybody is watching this.

Luke Vargas: I mean, we can look back to Trump’s first term for an example of how these similar tariffs went into effect. And you did see a lot of countries end up, as you alluded to there, getting exclusions or seeing their products put under duty-free quotas. Australia, Brazil, Canada, Mexico, Japan, South Korea, the EU, and the UK among others. This time around the White House is saying, we’re not going to do that. Those were loopholes effectively that let Chinese steel into the U.S. And assuming that is the case, I’m curious how the global production landscape for these metals has changed since Trump’s first term. Have they in a way that might alter how these American measures go into effect?

Nicole Voigt: Well, the thing is not a lot changed actually. So if we look at U.S. Steel demand and U.S. imports, since Trump’s first term, the U.S. built up roughly 20% of the capacity. However, imports only declined by 5%. It seems that the U.S. is not able to substitute yet for the imports. My hypothesis would be in the future standard quality material, like cold-rolled or galvanized material, could be produced domestically. However, the big question will be what happens to specialty materials such as tinplate, tool steel, or some stainless applications. Here we had significant company exemptions, and now it’s unclear if U.S. players will build this up, if we will see local capacity. Of course, this depends on the business case. You need investments, you need time, and most important new capabilities in your workforce to produce those products.

Luke Vargas: As we look to the U.S, Nicole, which industries would we be most likely to see affected by these tariffs? I know automakers may be one of them, and we’ve already seen them hit by the tariffs on Mexico and Canada. What else is worth watching?

Nicole Voigt: Well, to be honest, I think all downstream steel-intensive good manufacturers, small and medium enterprises like companies who produce pumps and screws, because the secondary effect is that steel prices go up, and we see this already. Just from the announcement to end of last week, steel prices in the U.S. went up more than 25%, whereas in the rest of the world either stayed stable or in the EU rose by 5%. So this means if you are a steel buyer, it doesn’t matter whether you consume imports or domestic supply, your prices go up and this means you are affected by the increased prices.

Luke Vargas: Nicole Voigt is the global metals co-lead at Boston Consulting Group. Nicole, thank you so much for being with us on What’s News.

Nicole Voigt: Thank you for having me.

Luke Vargas: And we’re already hearing from some major U.S. trading partners on their response to these overnight tariffs. The EU says starting April 1st, it’ll place duties on around $28 billion in American products, including bourbon whiskey, boats and motorcycles, but stressed, it was open to negotiation. Australia meanwhile isn’t retaliating, with its prime minister saying that trade tensions are economic self-harm that will be paid for by consumers. Instead, he’s pursuing a tariff exemption, which Trump had said he was considering given that Australia trades at a deficit with the U.S. Coming up, Greenlanders reject moves toward a quick independence in the face of Trump’s threats to take over the island, and Irish officials hope to charm their U.S. counterparts during tax and trade talks at the White House later today. We’ve got those stories and more after the break. Well, tariffs aside, a key economic data point could move markets today, the February Consumer Price Index, which will reveal whether Fed officials and the Trump administration have been able to turn the tide on inflation. Ahead of those figures, WSJ’s Take On the Week co-host Telis Demos asked Morgan Stanley’s Chief Global Economist, Seth Carpenter, where we are in the fight against price pressures and what that could mean for the Fed’s rate trajectory.

Seth Carpenter: Remember, inflation is the change in prices, it’s not the level of prices. And this is another place where I think eggheaded professional economists like me often talk past real people, because we’re talking about inflation. Inflation is coming down, everything’s getting a lot better.

Telis Demos: But prices are still rising.

Seth Carpenter: But prices are-

Telis Demos: And so that’s what people are noticing, maybe. Yeah, yeah, yeah.

Seth Carpenter: Exactly. And not only are prices still rising, people still remember what the price of milk was from 2019 and we’re well above that. And so I think there’s a little bit of a disconnect, and it’s probably largely the economist profession’s fault that we’re not clear. But the Fed is going to be thinking about inflation and asking, “Okay, with all the available information, does it look like the trend is down?” I think they’re going to read the data as saying yes to that and they’ll probably lower their policy rate one more time this year, probably in June, maybe in May, not at the upcoming meeting in March.

Luke Vargas: And to hear that full conversation, check out the latest episode of WSJ’s Take On the Week, wherever you get your podcasts. Turning to Washington, House Republicans have narrowly passed a proposal to fund the government into the fall, setting up a fight to get the measure passed in the Senate ahead of a Friday deadline and avert a government shutdown. Republicans said their funding plan would clear the way for the GOP to move ahead with President Trump’s agenda of tax cuts, spending reductions, and border security, which they’re hoping to pass into law later this year. They’ll need Democratic support to advance this week’s spending bill, but Democrats have painted the proposal as an effort by Republicans to hand more congressional power over federal spending to Trump and Elon Musk rather than continuing with bipartisan negotiations. And one of the things potentially on the line in the congressional budget is Medicaid. The program is mainly for low-income Americans, but deep cuts could affect state budgets and healthcare more broadly, and we want to know what questions you have. Send a voice memo to WNPOD at wsj.com, or leave a voicemail with your name and location at 212-416-4328, and we just might use it on the show. The Education Department is cutting its workforce by roughly half ahead of President Trump’s expected executive order aimed at dismantling the federal agency. As part of a reduction in force notice, the department said it will shed almost 2,000 jobs, including more than 1,300 federal workers through cuts, buyouts, and resignations. Senior department officials said full teams whose operations are seen as redundant or unnecessary are being cut, and those employees will receive full pay and benefits for 90 days, followed by severance pay based on their years of service. The officials said the cuts would affect every part of the department, but that the changes wouldn’t affect department functions such as delivering federal student aid. Voters in Greenland have opted for a slower move toward independence from Denmark, backing a party that focuses on domestic issues and rejects a closer relationship with the U.S. Security correspondent Sune Rasmussen says the center-right Democrats claimed an upset victory in the country’s parliamentary elections, which were called early in the face of President Trump’s threats to take control of the island.

Sune Rasmussen: Internationally, this can be seen as a setback for President Trump, I think is fair to say. The winning party is center-right, a moderate political party, which favors independence, but a gradual approach to independence. What this means is that they want to strengthen Greenlandic economy and Greenlandic businesses before a secession from Denmark takes place. So if President Trump was hoping for an opening for further American influence, that has been fairly closed off with this election.

Luke Vargas: Last week, Trump told a joint session of Congress that he thought the U.S. was going to bring Greenland under its control one way or the other, with promises on social media to invest billions of dollars into the country’s economy. And finally, Ireland’s leaders will need all the luck they can get when they head to the White House today for annual St. Patrick’s Day celebrations. The festive occasion usually involves green-colored fountains, shamrocks, and Guinness, but as the Journal’s Chelsey Dulaney explains, this year’s meeting comes as the emerald isle’s record $87 billion trade surplus with the U.S., only smaller than those of China, Mexico, and Vietnam, and driven by a surge in pharmaceutical exports, make it a likely tariff target.

Chelsey Dulaney: It’s very unique in the world of diplomacy to have this standing invite to come to the White House every single year. There’s a huge Irish-American population in the United States, so it normally is a celebration, but this year there has been so much hand-wringing about the visit because of the backdrop of huge global trade tensions. Ireland had this huge economic explosion over the past several years, and that’s been driven in large part by American companies who have set up these Irish operations to bring down their taxes. And so this makes Ireland even more vulnerable to the threat of tariffs. Or if Trump does implement changes to the tax code, that would really change the calculations for these American companies.

Luke Vargas: And that’s it for What’s News for this Wednesday morning. Today’s show was produced by Daniel Bach and Kate Bullivant, with supervising producer Sandra Kilhof. And I’m Luke Vargas for the Wall Street Journal. We will be back tonight with a new show. Until then, thanks for listening.