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

Summary

WSJ What’s News: Why Trump’s Tariffs Will Push Up U.S. Steel Prices

Release Date: March 12, 2025
Host: Luke Vargas
Producer: Daniel Bach and Kate Bullivant
Supervising Producer: Sandra Kilhoff

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Introduction

In this episode of WSJ What’s News, host Luke Vargas delves into the ramifications of President Donald Trump's latest trade measures, specifically focusing on the newly implemented tariffs on U.S. steel and aluminum imports. The discussion extends to the global response from major trading partners, the potential impact on domestic industries, and ancillary stories that influence the broader economic landscape.

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Trump’s Steel and Aluminum Tariffs

Overview of the Tariffs

At [00:56], Vargas introduces the topic by highlighting the imposition of a 25% tariff on all steel and aluminum imports, mirroring the 25% steel and 10% aluminum tariffs from Trump's first term. The administration justifies these measures as necessary to combat what it perceives as an "unfair global steel trade," wherein foreign subsidies and trade barriers allow other countries to offer steel at lower prices than domestic U.S. producers.

Impact on Global Steel Producers

Vargas engages with Nicole Vogt, Managing Director at Boston Consulting Group and Global Metals Co-Lead, at [02:03] to discuss the global implications:

Nicole Vogt ([02:10]): "The whole world is watching that... short term the US will most likely be impacted because you cannot change that quickly your production set up than to produce everything locally."

Vogt elaborates on the immediate challenges the U.S. faces in substituting imports with domestic production, noting that "the U.S. built up roughly 20% of the capacity. However, imports only declined by 5%" since Trump's initial tariffs. She emphasizes the level playing field now established by removing exemptions, compelling all importers to compete based on landed costs.

Effects on Domestic Industries

At [05:03], Vargas probes further into which sectors within the U.S. are most susceptible to these tariffs:

Nicole Vogt ([05:10]): "All downstream, steel intensive, good manufacturers, small medium enterprises... your prices go up and this means you are affected by the increased prices."

Vogt identifies that industries reliant on steel, such as automakers, pump manufacturers, and hardware producers, will bear the brunt of rising steel prices. She notes a 25% surge in U.S. steel prices post-announcement, compared to a modest 5% increase in the EU and stability elsewhere.

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Global Reactions to U.S. Tariffs

European Union’s Response

At [05:55], Vargas reports the EU's retaliation:

Luke Vargas ([06:00]): "The EU says starting April 1st it'll place duties on around $28 billion in American products... but stressed it was open to negotiation."

The EU plans to impose duties on various American goods, including bourbon, whiskey, boats, and motorcycles, signaling escalating trade tensions but also leaving room for diplomatic negotiations.

Australia’s Stance

Australia opts for a different approach, as Vargas explains at [05:55]:

Luke Vargas ([06:05]): "Australia isn't retaliating... instead, he's pursuing a tariff exemption... Australia trades at a deficit with the US."

Australia's Prime Minister argues that retaliatory tariffs would be "economic self-harm" and seeks exemptions to mitigate the impact, reflecting a strategic choice to protect consumers from price hikes.

Greenland’s Political Climate

The episode touches on geopolitical maneuvers involving Greenland:

Political Analyst ([11:17]): "This can be seen as a setback for President Trump... the winning party is centre right... strengthens Greenlandic economy before a secession from Denmark."

Greenlanders have voted to slow down the push for independence from Denmark, countering Trump's ambitions to increase American influence and potentially annex the territory for its mineral resources.

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Additional Economic Insights

Consumer Price Index (CPI) and Inflation

At [07:27], the discussion shifts to the upcoming release of the February CPI:

Seth Carpenter ([07:53]): "Inflation is the change in prices, it's not the level of prices... Fed is going to be thinking about inflation and asking, okay, with all the available information, does it look like the trend is down?"

Economist Seth Carpenter of Morgan Stanley suggests that while technical inflation metrics may be improving, public perception of rising prices remains a concern. He anticipates the Federal Reserve might lower policy rates by mid-year based on these trends.

U.S. Government Funding and Policy Changes

Vargas highlights House Republicans' narrow passage of a government funding proposal aimed at preventing a shutdown:

Luke Vargas ([10:00]): "Republicans said their funding plan would clear the way for the GOP to move ahead with President Trump's agenda... Democrats have painted the proposal as an effort to hand more congressional power over federal spending to Trump and Elon Musk."

The proposal includes potential deep cuts to programs like Medicaid, which could have broader implications for state budgets and healthcare services.

Education Department Workforce Reduction

The Education Department is set to cut its workforce by approximately 2,000 jobs, including over 1,300 federal workers:

Luke Vargas ([10:45]): "Senior department officials said full teams whose operations are seen as redundant or unnecessary are being cut... the changes wouldn't affect department functions such as delivering federal student aid."

These cuts are part of broader efforts to streamline federal operations in anticipation of potential executive orders to dismantle the agency.

Ireland’s Economic Balancing Act

With St. Patrick's Day approaching, Ireland faces delicate trade negotiations amidst robust economic growth driven by American multinational companies:

Chelsea Delaney ([12:00]): "Ireland had this huge economic explosion... driven in large part by American companies... makes Ireland even more vulnerable to the threat of tariffs or if Trump does implement changes to the tax code."

Irish leaders are preparing to host the White House celebrations against a backdrop of heightened trade sensitivities, balancing economic ties with the U.S. against protectionist pressures.

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Conclusion

This episode of WSJ What’s News provides a comprehensive analysis of President Trump's renewed tariffs on steel and aluminum, exploring the immediate and long-term effects on both domestic industries and the global metals market. Through expert insights and current geopolitical developments, Vargas paints a nuanced picture of the intricate web of trade relations and economic policies shaping the U.S. and the world. The episode underscores the interconnectedness of trade decisions, political strategies, and economic outcomes, offering listeners a detailed understanding of the factors at play.

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Notable Quotes:

• Nicole Vogt ([02:10]): "Short term the US will most likely be impacted because you cannot change that quickly your production set up than to produce everything locally."

• Nicole Vogt ([05:10]): "All downstream, steel intensive, good manufacturers, small medium enterprises... your prices go up and this means you are affected by the increased prices."

• Political Analyst ([11:17]): "This can be seen as a setback for President Trump... the winning party is centre right... strengthens Greenlandic economy before a secession from Denmark."

• Seth Carpenter ([07:53]): "Inflation is the change in prices, it's not the level of prices... Fed is going to be thinking about inflation and asking, okay, with all the available information, does it look like the trend is down?"

• Chelsea Delaney ([12:00]): "Ireland had this huge economic explosion... driven in large part by American companies... makes Ireland even more vulnerable to the threat of tariffs or if Trump does implement changes to the tax code."

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This summary encapsulates the key discussions and insights from the episode, providing a detailed overview for listeners unfamiliar with the original content.

Transcript

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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 threatened 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.

[Political Analyst]

So if President Trump was hoping for an opening for further American influence, that has sort of 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% US tariffs on all steel and aluminum imports went into effect at midnight. The measures bear similarity to 25% steel and 10% aluminum tariffs that 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 US Made metals. So what effect will the new tariffs have on America's trading partners and its domestic manufacturers? Nicole Vogt is a managing director at Boston Consulting Group and the firm's global Metals co lead. Nicole, what does this US Action mean for steel producer around the world?

[Nicole Vogt]

Yeah, basically the whole world is watching that. Yes, 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 you know what is the impact on that? And to be honest, short term the US will most likely be impacted because you cannot change that quickly your production set up than 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. So suddenly everybody needs to compete again on landed Cost us. And this is why everybody is watching.

[Luke Vargas]

This in terms of, 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 US 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 Vogt]

Well, the thing is, not a lot changed actually. So if we look at US steel demand and US imports since Trump's first term, the US built up roughly 20% of the capacity. However, imports only declined by 5%. So it seems that the US is not able to substitute yet for the imports. So 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 tin plate tool steel or some stainless applications. Here we had significant company exemptions and now it's unclear if US 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. We've already seen them hit by the tariffs on Mexico and Canada. What else is worth watching?

[Nicole Vogt]

Well, to be honest, I think all downstream, steel intensive, good manufacturers, small 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 US 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 Vogt is the Global Metals Co lead at Boston Consulting Group. Nicole, thank you so much for being with us on what's news.

[Nicole Vogt]

Thank you for having me.

[Luke Vargas]

And we're already hearing from some major US 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'll 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 US 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 US Counterparts during tax and trade talks at the White House later today. We've got those stories and more after the break.

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[Luke Vargas]

Well, tariffs aside, a key economic data point could move markets today. The February Consumer Price Index, which will reveal whether it 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 Telus 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's coming down, everything's getting a lot better.

[Advertiser]

Prices are still rising. And that's what people are noticing.

[Luke Vargas]

Maybe.

[Seth Carpenter]

Exactly. Not only are prices still rising, people still remember what the price of milk was from 2019, and we're well above that. 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? Yeah, I think they're gonna 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 pass, 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 wnpodsj.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 US Security correspondent Suna 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.

[Political Analyst]

Internationally. This can be seen as a setback for President Trump. I think is fair to say the winning party is centre right sort of 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 sort of been fairly closed off with this election.

[Luke Vargas]

Last week, Trump told a joint session of Congress that he thought the US 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 Chelsea Delaney explains, this year's meeting comes as the Emerald Isles record $87 billion trade surplus with the US only smaller than those of China, Mexico and Vietnam, and driven by a surge in pharmaceutical exports, make it a likely tariff target.

[Chelsea Delaney]

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 Kilhoff. And I'm Luke Vargas for the Wall Street Journal. We will be back tonight with a new show. Until then, thanks for listening.