In March 2025, US President Donald Trump imposed aggressive tariffs on steel and aluminium imports, triggering global economic disruption and affecting countries such as Japan, China, South Korea and India. Canada and other large economies have responded by announcing tariffs on US products. These measures threaten industries reliant on steel and aluminium, including automotive and military sectors, and could lead to significant job losses. Tariffs risk escalating trade wars, harming global welfare and disrupting the world’s post-pandemic economic recovery. Countries should instead turn to stable trade agreements to shore up economic resilience.

On 12 March 2025, US President Donald Trump’s universal 25 per cent tariffs on steel and aluminium imports took effect. But Trump hasn’t stopped at metals, announcing a 10 per cent tariff on all imports and supposedly reciprocal tariffs on 57 countries on 2 April. But in a surprise move, Trump announced a 90-day pause on reciprocal tariffs for all countries except China. Nonetheless, the sweeping steel and aluminium tariffs are sending shockwaves through the global economy.

Trump’s aggressive tariff manoeuvres continue to dominate headlines. Though he pushes hardline policies, Trump also signals a willingness to strike deals.

These tariffs threaten severe consequences for Canada, which accounts for over half of US aluminium imports and nearly 23 per cent of steel imports. A similar tariff in 2018 slashed Canadian steel exports to the United States by 38 per cent in June 2018, while aluminium exports fell on average 18.5 per cent each month. On 13 March 2025, Canada responded with retaliatory tariffs on US$21 billion worth of US goods on top of the 25 per cent tariffs announced on 4 March.

The EU also faces trade turbulence. Goldman Sachs forecasts that US–EU tensions could shrink the EU economy by 0.5 per cent in 2025. The bloc already struggles with labour market rigidities and skyrocketing gas and electricity costs that are 3–4 and 2.5 times higher than US prices, respectively.

The EU has responded with tariffs on US$28 billion worth of US goods, with possible additional countermeasures following the US announcement of a 20 per cent tariff on all EU exports on 2 April. Mexico — which supplies over 15 per cent of US steel imports — and other key European and Latin American exporters are bracing for impact.

The tariffs have also roiled two of the largest steel producers in South Korea and Japan. While both nations have condemned Trump’s unilateral move, they have held off on retaliatory tariffs and opted instead to push for immediate negotiations. China’s stakes are relatively higher because it is already at the centre of US trade disputes. The world’s two largest economies are now locked in a full-scale tariff war. In response to US reciprocal tariffs, China imposed retaliatory duties at a steep 84 per cent rate, prompting the US to hit back with 125 per cent tariffs on Chinese imports. As China refuses to yield, it may turn to government stimulus, currency depreciation and export diversification to cushion the blow.

India — a relatively smaller player in US metal trade — dodged immediate fallout but history offers a warning. The 2018 steel tariffs led to a 34 per cent drop in India’s steel exports as global steel flooded the Indian market which caused price crashes and domestic losses. A similar scenario cannot be ruled out for this round of tariffs.

Trump’s tariffs are expected to hurt US industries and consumers. The 2018 tariffs particularly disrupted supply chains in the US automotive sector which relies heavily on imported steel and aluminium similar to the shipbuilding, military and home appliance industries. According to the World Steel Association, US steel production — though generally varying year-on-year — was 1 million tonnes less than pre-tariff levels in 2023.

An October 2024 study by trade credit insurance provider Atradius warns that future tariffs on automobile parts and vehicle imports could add up to US$6400 to the cost of a US$30,000 vehicle, reduce vehicle sales by 2 million units and result in over 700,000 job losses across the sector.

At the core of Trump’s aggressive tariff policy are concerns over the massive US merchandise trade deficit, which stood at US$1.2 trillion in 2024. But while advocates of protectionism argue that tariffs reduce import dependence and lower global prices by creating excess supply, tariffs often trigger retaliatory measures — like those unfolding in 2025 — and escalate into full-scale trade wars that ultimately harm economic welfare.

History offers a cautionary tale. The Smoot-Hawley Tariff Act of 1930, introduced to protect US industries during the Great Depression, imposed duties on more than 20,000 imported goods. The move backfired because key trading partners retaliated which caused US exports and imports to plummet by 61 and 66 per cent, respectively. While US tariffs before the Second World War peaked at 50–60 per cent for many goods, they stabilised at around 4–5 per cent before Trump’s first presidency.

Countries have two key options for responding to these tariff measures. The first is retaliatory tariffs, which economic theory suggests benefit no one, hurt consumers and reduce general welfare. The second is negotiating bilateral trade deals with Washington to secure exemptions or favourable terms. The United States remains the world’s largest consumer market so losing access due to tariffs will significantly impact the exports of several countries.

As the global economy recovers sluggishly following the COVID-19 pandemic, Trump’s tariff brinkmanship injects fresh uncertainty into markets. Rising consumer prices and disrupted supply chains threaten a stalled economic recovery that raises fears of a not-so-distant slowdown. As businesses and governments weigh their next steps, it is clear that stable trade agreements — not tit-for-tat tariffs — offer the best path to economic resilience.

Source: East Asia Forum

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