Canada, Oh Canada
Yesterday, Trump levied a worldwide 25% tariff on steel and aluminum imports to the U.S.! Yes, the entire world. Most notably Canada, Mexico, both of them our longstanding allies and fellow NAFTA partners. It happens; it happened. It affects 21 Million tons of steel products; our 2023 supply of steel sourced in the U.S. was approximately 90 Million tons, including flat-rolled, mini milled, and tubular. Imported steel goods were, therefore, 19%, a significant amount. Below, I’ll have a look at the Canadian impact, but first:
The chart below shows the world share of steel imports for 2023:
As far as aluminum is concerned, Canadian imports (2024) provided the lion’s share, outpacing all other countries.
The total amount of all imports vs. steel and aluminum imports is illustrated to the left (2024 data). The wedge shows the amount we import worldwide, Canada’s portion of the wedge is smaller than the total, of course.
Thus, Trump’s targeted steel tariffs should have but a moderate effect on overall prices, but a significant impact on steel prices, but a larger impact on aluminum. And these products are not in general, final products, they are intermediate, used in the production of final products. The price increases that will occur during Trump’s tariffs will be passed along to the American public, as higher prices, and will contribute to overall inflation, particularly in auto production costs and consumer sales of the final products. And recall how maniacally worked up Trump was about “Biden’s inflation,” which was brief and directly related to COVID’s effects. Inflation now is running between 2.5 and 3%, within the Federal Reserve’s target rate. So, what does our daft president do to bring prices down as he promised his MAGAs he would do on “day one”? Well. he slaps on tariffs – worldwide – which will accelerate inflation. Of course. Indeed.
Tariff Man!
In truth, tariffs are a mixed bag, and often they do not meet the economic objectives of the country imposing tariffs, for example, aiding the development of home grown industries. Trump, however, has since his early middle age, not gotten the message. On the record, he famously said, “Tariff is the most beautiful word in the dictionary,” and dubbed himself “Tariff Man.” He thinks its an economic nuclear weapon.
Why? He is so dull he does not accept the axiom that tariffs almost always cause price inflation! He insists that tariffs are paid by the tariffed counties; they are not, they’re paid by the importer, and then passed along through the production pipeline as a price increase at the point of sale to consumers. Where is the crater sized hole in his brain? Certainly, he’s heard from many that he is dead wrong, but who in his present administration dares tell him? Could son Barron convince him, he’s probably had some high school level economics? No, Trump is so self-destructively certain and goofily confident that he’s ultimately wholly irrational, across the board. Reasoning with him is, in any practical sense, impossible. There’s no clear definition of how addled he is. But it’s a lot.
So, I expect his tariffs will backfire as the public and business interests (such as the automobile industry) speak loud and clear. Trump will likely try to periodically soften the blow to price inflation by suddenly reducing them, and by striking deals that exempt certain industries from the tariffs, such as agriculture and automobiles. This, of course will defeat the reason for tariffs. He’ll play at tariffs like a boy with a yoyo – up and down, in and out. In doing so he’ll cause massive economic uncertainty that may paralyze whole industries trying to plan their business choices. And this level of uncertainty is anathema to producing a stable economy, and stability is the holy grail of commerce. Trump’s yoyo grift is the tool of a boy, not a man. Certainly not a tariff man . . .
