Trump proposes doubling steel and aluminum tariffs to 50% — Will higher costs fuel inflation?
President Donald Trump has sent shockwaves through the global economy. He announced plans to double tariffs on steel and aluminum imports from 25% to 50%. The new rates take effect June 4, 2025.
The decision, revealed at a rally at U.S. Steel’s Mon Valley Works in Pennsylvania, aims to protect American jobs.
But economists warn it could ignite inflationary pressures. Higher costs for consumers and businesses loom large. International partners are already pushing back.
A Bold Move to Bolster U.S. Steel
Trump’s announcement came during a high-energy rally. He stood before steelworkers in West Mifflin, Pennsylvania.
The president tied the tariff hike to a $14.9 billion deal between Japan’s Nippon Steel and U.S. Steel.
“We’re going to bring it from 25% to 50%—the tariffs on steel into the United States of America—which will even further secure the steel industry.”
He argued the move would preserve jobs and strengthen domestic manufacturing.
The tariff increase builds on existing 25% tariffs imposed earlier this year. Those followed a brief threat of 50% tariffs on Canadian steel, which Trump later rescinded.
The new policy applies to all steel and aluminum imports, effective in just days. Trump framed it as a defense against “shoddy” foreign products, particularly from China.
“At 25%, they can sort of get over that fence. At 50%, they can no longer get over the fence,” he told the crowd.
Inflationary Pressures on the Horizon
Economists are sounding alarms. Tariffs typically raise prices for imported goods.
A Tax Foundation report highlights that steel and aluminum tariffs have a near-complete pass-through to U.S. prices.
This means consumers bear the brunt of higher costs. A May 2023 U.S. International Trade Commission study found that earlier tariffs boosted protected industries by $2.8 billion.
But downstream industries, like automotive and construction, lost $3.4 billion due to pricier inputs.
The new 50% tariffs could amplify this effect. “Tariffs raise prices and reduce economic output,” the Tax Foundation notes, citing the 2002 Bush steel tariffs as a precedent.
The report projects the tariffs will shave more than 0.05% off U.S. GDP and capital stock.
Pre-tax wages are expected to remain flat. Worse, the policy could eliminate 23,000 full-time equivalent jobs, mostly in industries reliant on steel and aluminum.
For households, the impact could be significant. The Tax Foundation estimates Trump’s broader tariff policies, including this hike, equate to a $1,200 tax increase per U.S. household in 2025.
This reduces after-tax incomes by 0.3% on average. The top 1% face a 0.2% income reduction. These figures suggest a hidden tax that could squeeze consumer budgets.
| Economic Impact | Long-Run GDP | Capital Stock | Pre-Tax Wages | Full Time Equivalent Jobs |
|---|---|---|---|---|
| Section 232 Tariffs | < -0.05% | < -0.05% | 0.0% | -23,000 |
| Total Tariffs Currently in Effect | -0.1% | -0.1% | 0.0% | -143,000 |
Global Backlash and Trade Tensions
International partners are not staying silent. The European Union “strongly regrets” the tariff hike.
An EU spokesperson told NBC News, “This decision adds further uncertainty to the global economy and increases costs for consumers and businesses on both sides of the Atlantic.”
The EU paused countermeasures in April to negotiate a trade deal. Now, it’s prepared to act, possibly by July 14, 2025, if talks falter.
UK steelmakers are equally dismayed. They called the tariffs “yet another body blow” to their industry.
The UK government is seeking clarity from the U.S. on the policy’s impact. Earlier this month, the UK secured a trade deal with the U.S., but the new tariffs threaten to strain relations.
Canada, a major steel exporter, also faces challenges. Trump’s earlier tariff threats prompted swift retaliation.
The new 50% rate could reignite tensions, potentially leading to a broader trade war.
U.S. Steel Industry Cheers, Others Worry
The U.S. steel sector is celebrating. Shares of Cleveland-Cliffs Inc. jumped 26% after the announcement.
The tariff hike, paired with the Nippon Steel deal, is seen as a boon for domestic producers. Trump emphasized that the policy would “help keep jobs for steel workers in the U.S.”
But not all industries are cheering. Sectors like automotive, construction, and manufacturing rely on affordable steel and aluminum.
Higher import costs could force price hikes or reduced output.
A University of Chicago study found that earlier tariffs raised washer prices by $86 and dryer prices by $92 per unit, costing consumers over $1.5 billion.
Economists Highlight Risks
Economists are cautious. Ernie Tedeschi of the Yale Budget Lab told that Trump’s tariffs are “unpredictable and still working their way through the system.”
He estimates they could reduce household purchasing power by $2,800.
Specific goods face steep price increases: shoes by 15%, clothing by 14%. The average U.S. tariff rate could hit 17.8%, the highest since 1934.
The broader economic toll is concerning. The Tax Foundation projects that all current tariffs could cut GDP by 0.1% and eliminate 143,000 jobs.
Tedeschi warns of a 0.7 percentage point drop in economic growth and a 0.4 percentage point rise in unemployment from 4.2%.
“Tariffs are a tax on consumers,” one economist noted, highlighting the inflationary risk.
Consumers Brace for Higher Prices
The tariff hike could hit consumers hard. Walmart has warned of price increases due to tariffs.
Smaller businesses are also feeling the pinch. Snowy Owl Coffee expects to raise prices by 25-35 cents per cup.
Village Lighting Co. faces a $1 million tariff bill and plans a 10%-15% price hike.
These examples show how tariffs ripple through the economy, affecting both imported and domestic goods.
| Consumer Price Impacts from Tariffs | Product/ Service | Estimated Price Increase |
|---|---|---|
| Shoes | Footwear | $15-$30 per pair |
| Clothing | Apparel | $10-$20 per item |
| Coffee (Snowy Owl Coffee) | Coffee | $0.25-$0.35 per cup |
| Lighting (Village Lighting Co.) | Lighting | $50-$150 per fixture |
A High-Stakes Gamble
Trump’s tariffs are a gamble. They aim to protect American jobs and industry. But they risk higher prices and economic slowdown.
The EU’s threat of countermeasures looms large. A trade war could disrupt global supply chains further. U.S. exporters may face retaliation, adding to economic uncertainty.
As June 4 approaches, businesses are scrambling. Consumers are preparing for higher costs. Economists warn that the full impact may take time to emerge.
“Tariffs work their way through the system,” Tedeschi noted. The question is whether the benefits to the steel industry will outweigh the broader economic costs.
What Lies Ahead?
The coming weeks will be critical. The EU’s response could shape global trade dynamics.
U.S. businesses are assessing supply chains and pricing strategies. Consumers may soon feel the pinch at checkout counters.
Trump argues the tariffs will boost American manufacturing. But the risk of inflation and trade tensions cannot be ignored.
For now, the debate rages on. Will the tariffs secure the steel industry’s future? Or will they spark an inflationary spiral? Only time will tell.
