Steel and Aluminum Tariffs

steel and aluminum

In the U.S., the history of tariffs is almost as long as the history of the country. One of the first laws ever passed by the first U.S. Congress was the Tariff Act of 1789, which imposed a 5 percent tax on any goods imported into the fledgling country.

Until recently, though, tariffs weren't something that made a lot of news, at least in modern times. At the start of the 20th century, tariffs made up about 30 percent of the total value of goods imported into the country. By 2016, that number had fallen to just 1.5 percent of the total amount of goods imported into the U.S. The decline in tariffs was, in many ways, connected to the rise of free trade and to agreements that incentivized globalization. Additionally, the introduction of a federal income tax in the early 20th century proved to be a better source of revenue for the government than taxing imported goods.

Thanks to the recently introduced U.S. steel and aluminum tariff, tariffs are back in the limelight and are a source of debate and concern across multiple sectors.

What Are the Steel and Aluminum Tariffs?

In the summer of 2017, President Trump announced he and his administration were considering restricting imports of aluminum and steel into the country. The potential restrictions seemed to divide the country. Some were against the idea of imposing a tariff on imported steel and metal. Companies in the auto manufacturing industry, for example, were generally against the tariffs. Meanwhile, companies that produced steel domestically were mostly in favor of the potential tariffs, believing steel import taxes would improve business for domestic producers.

Around eight months after the idea of restricting imports of steel and aluminum into the U.S. was introduced, the president announced a tariff would go into effect. Steel products imported into the country would be subject to a 25 percent tariff, while aluminum would be subject to a 10 percent tariff.

Initial reaction to the tariffs wasn't particularly positive, at least in some quarters. The Dow Jones, S&P 500 and Nasdaq all saw drops or declines on the day the tariffs were announced. Stock values didn't fall across the board, though. While auto companies such as Ford and General Motors and other companies that use a lot of steel saw a drop that day, companies such as U.S. Steel saw considerable gains.

Public opinion about the steel and aluminum tariffs wasn't particularly positive, either. One poll found that half of Americans opposed the tariffs. More than 60 percent of the people polled disagreed with the president's assertion that a trade war as a result of the tariffs would be good for the country.

steel workers

Despite the negative response from certain parties and industries, the tariffs went into effect on March 23, 2018.

What Countries Are Affected By the Tariffs?

It's worth pointing out not every country that imports steel and aluminum into the U.S. is affected by the tariffs, at least not initially. Mexico and Canada are both exempt from the duty, pending renegotiation of the North American Free Trade Agreement. Currently, Canada is one of the top suppliers of aluminum and steel to the U.S. About 16 percent of steel imports and 41 percent of aluminum imports come from Canada.

The Trump administration later announced several other countries would also be exempt from the tariffs. The countries exempt from the tariffs include the European Union, Australia, Argentina, Brazil and South Korea. Countries that didn't get an exemption included China and Japan.

The exemption was slated to continue through May 1, 2018, at which time the president will decide whether or not to continue to exempt those countries.

How Did the Steel and Aluminum Tariffs Come Into Existence?

What was behind the decision to impose a tariff on imported steel and aluminum, after many decades of free trade? To understand that, it helps to know how the rules governing tariffs work.

Although tariffs were common through the early part of the 20th century, the president wasn't in a position to impose them. The Reciprocal Trade Agreement Act of 1934 was the first law giving the president power to create tariffs on imported goods.