U.S. President Donald Trump yesterday announced his intention to impose tariffs of 25 percent and 10 percent, respectively, on imports of steel and aluminum, and the reaction in stock markets around the world has been less than favorable.
Stock markets around the world took a tumble yesterday after U.S. President Donald Trump announced his intention to impose stiff tariffs on imports of steel and aluminum.
In the United States, the Dow Jones Industrial Average – generally referred to as “the Dow” – dropped more than 400 points on Thursday, ending the day down 1.8 percent from Wednesday’s close before falling another 1 percent at market open Friday morning. The Nasdaq likewise slipped 1.1 percent yesterday and another 1.4 percent at market open today to 7,099.54, while the S&P 500 declined 1.4 percent yesterday and 0.7 percent in pre-market trading on Friday, opening at 2,658.89.
European stocks also took a hit after European Commission leaders condemned Trump’s announcement, vowing to take countermeasures in the World Trade Organization (WTO) for what it called “unfair,” “protectionist” policies that “put thousands of European jobs at risk.”
The German DAX slid 2 percent on Thursday and was down another 2.3 percent to a reading of 11,907.15 as of time of writing (around 5 p.m. CET), while the Paris CAC 40 fell 1.3 percent yesterday and another 2.2 percent to 5,137.30 during Friday trading. London’s benchmark index, the FTSE 100, fell 1.1 percent each day, settling at 7,080.81 at time of writing on Friday.
Over in Asia, the Shanghai SSE Composite fell only 0.6 percent from Thursday’s close to 3,254.45 at close of trading on Friday. Japan’s Nikkei 225 and Hong Kong’s Hang Sheng, however, did not fare nearly as well, tumbling 2.6 percent to 21,150.80 and 1.5 percent to 30,558.88, respectively.
Shares in certain individual steel producers also took a nosedive on the news, with China’s Baoshan Iron & Steel and Japan’s Nippon Steel both falling nearly 4 percent, according to a report from CNN Money.
European steelmakers ThyssenKrupp and Salzgitter of Germany also fell 3 percent and 5 percent, respectively, while industry leader ArcelorMittal saw its stock drop more than 4 percent, said CNN Money, noting that firms with strong ties to the U.S. like Australia’s Bluescope Steel, which has a mill in Ohio, and Japanese steelmaker Yamato Kogyo, which has a joint venture with U.S. firm Nucor, fared much better, climbing 1.2 percent and 1.4 percent, respectively.
Although the move was ostensibly designed to hurt China, which Trump says has “decimated” the U.S. steel and aluminum industries by dumping cheap products on the market, the impact of the proposed tariffs will be most notable in Canada and, to a lesser extent, Brazil.
According to a report published by the U.S. Department of Commerce’s International Trade Administration last year, Canada and Brazil are the largest importers of steel to the U.S., representing 16 percent and 13 percent of the market, respectively, while China isn’t even among the top 10 importers.
In addition, Canada is the largest importer of aluminum, representing 56 percent of foreign sourced aluminum in the U.S. market, followed by Russia at 8 percent and the United Arab Emirates at 7 percent, according to figures from the United States Geological Survey.
The tariffs, which come in the midst of Trump’s attempts to renegotiate the 23-year-old North American Free Trade Agreement (NAFTA) with Canada and Mexico, have stoked fears of retaliation from Canada and other trading partners.
Canadian Minister of Foreign Affairs Chrystia Freeland called the tariffs “absolutely unacceptable,” adding that any such restrictions on trade in steel and aluminum would cause harm to manufacturers and workers in both countries.
“The steel and aluminum industry is highly integrated and supports critical North American manufacturing supply chains,” she said in a statement. “The Canadian government will continue to make this point directly with the American administration at all levels.
“Canada is a safe and secure supplier of steel and aluminum for U.S. defense and security. Canada is recognized in U.S. law as a part of the U.S. National Technology and Industrial Base related to national defense,” said Freeland, adding that it is “entirely inappropriate to view any trade with Canada as a national security threat to the United States.”
She noted the United States’ current $2 billion surplus in steel trade with Canada, which accounts for 50 percent of U.S. exports, is by far the most of any single country worldwide.
“We will always stand up for Canadian workers and Canadian businesses,” said Freeland. “Should restrictions be imposed on Canadian steel and aluminum products, Canada will take responsive measures to defend its trade interests and workers.”
Pittsburgh, Pa.-based Alcoa, the sixth largest aluminum producer in the world, also opposed the blanket tariffs, in large part because of their potential effects on trusted U.S. trading partners like Canada.
“We believe vital trading partners, including Canada, should be exempt from any tariff on aluminum,” Alcoa said in a statement to CNBC. “The aluminum industry has an integrated supply chain and actions should not penalize those that abide by the rules. We will continue to work on solutions that create a level playing field and address Chinese overcapacity.”
The American International Automobile Dealers Association (AIADA) also came out in opposition the tariffs on both steel and aluminum imports, arguing they would do damage to an already suffering U.S. auto industry and ultimately result in higher prices on vehicles for consumers, not to mention potential retaliatory tariffs other countries could place on U.S. exports.
“These proposed tariffs on steel and aluminum imports couldn’t come at a worse time,” AIADA President and CEO Cody Lusk said in a statement. “Auto sales have flattened in recent months, and manufacturers are not prepared to absorb a sharp increase in the cost to build cars and trucks in America. The burden of these tariffs, as always, will be passed on to the American consumer. Car shoppers looking for a deal will instead find that they are paying a new tax to transport themselves and their families.”
“Steel and aluminum tariffs could directly counteract any benefits American manufacturers have seen from tax and regulatory reform,” the association added. “An analysis of tariffs on steel imposed in 2002 found that the Bush steel tariffs cost 200,000 jobs, including 30,000 in Michigan, Ohio, and Pennsylvania alone.”
Global markets tumble on Trump’s proposed ‘Section 232’ tariffs
